New York Times
June 8, 2011
In March, just as it was becoming clear that Greece might have to ask Europe for another package of loans to prop up its failing economy, Prime Minister George A. Papandreou seriously considered a radical plan intended to resolve, once and for all, his country’s debt crisis. Under the proposal, Greece would transfer as much as €133 billion — or 40 percent of its government debt — to the European Central Bank, which would then pay off the obligation by issuing its own euro bond.
It would be a “restructuring without a haircut,” in the view of the plan’s proponents, who enthusiastically described it to Mr. Papandreou in a series of secret meetings earlier this year. The result, ideally, would be to ease the weight of the Greek debt on the economy, clearing the way for renewed growth, while keeping the bankers and credit ratings agencies on board.
In many ways, the plan was a dreamy alternative to the grim calculus of Europe’s demands for more austerity from Greece in return for more loans. And Mr. Papandreou went so far as to ask a political ally and the plan’s two proponents, a British and a Greek economist, to lobby Europeans in its favor.
But, according to economists who participated in the discussions, the Greek finance minister, George Papaconstantinou, was opposed, arguing that Germany, to say nothing of the E.C.B., would never go for it. And while a number of economists contend that Europe will ultimately have to develop some sort of plan for restructuring Greece’s debt, Athens has shelved any such notion for now as it moves toward another bailout to keep the country out of bankruptcy.
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