Greek Bailout Role for Bondholders Will Need Trichet Assent, Juncker Says

Bloomberg
June 11, 2011

A bailout for Greece must include “voluntary” investor participation and meet the approval of central bankers, Luxembourg’s Jean-Claude Juncker said, seeking to narrow a dispute over the second Greek rescue in two years.

“There must be a participation of private creditors,” Juncker, who leads the group of euro-area finance ministers, said in an interview on Radio Berlin-Brandenburg today. “It must be voluntary.”

Luxembourg’s prime minister is trying to bridge the gap between German Finance Minister Wolfgang Schaeuble, who has called for Greek bondholders to extend the maturities of their debt by seven years, and European Central Bank President Jean- Claude Trichet, who says imposing losses on creditors would be akin to a default. European officials are racing to find a plan to stem Greece’s debt crisis by June 24 while sharing the cost of a new rescue with bondholders.

“We cannot push through private investor participation without, or against, the ECB,” Juncker said. “A default would mean the ECB would have to end its accompanying programs. A default would mean we have reached the end of the line.”

Schaeuble, in a June 6 letter to Trichet and fellow euro finance ministers, called the seven-year extension to give Greece more time to cut its debt and budget deficit.

Governments aim to reach an agreement on a new aid package by a European Union summit on June 23-24. The IMF has threatened to withhold its share of what remains of Greece’s original 110 billion-euro ($158 billion) bailout until governments guarantee that the country’s financing needs for the next 12 months are covered. The IMF was due to turn over 3.3 billion euros this month.

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