June 10, 2011
European Central Bank President Jean-Claude Trichet stood his ground in the high-stakes dispute between the bank and Germany over how to handle Greece's debt burden, reiterating the ECB's opposition to extending the maturities on Greek debt.
It was the bank's first public response to a letter from Germany's finance minister calling for such a rescheduling earlier this week.
"We would say it's an enormous mistake to embark on a decision that would lead to a credit event" for Greece, Mr. Trichet told a news conference. He insisted on "no credit event, no selective default," he said.
That position directly contradicts a German proposal to induce investors to swap Greek government bonds maturing in 2012 to 2014 for new bonds that would mature seven years later. Such a bond exchange would probably amount to a "selective default" by Greece, according to a German government paper circulated to other euro-zone governments last week.
The ECB is "categorical in ruling out" any form of Greek debt restructuring in the current environment, said Marco Valli, economist at lender UniCredit in Milan.
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