June 1, 2011
The European Union’s top economic official said a solution to keeping Greece solvent is combining bold deficit cuts reminiscent of Belgian sacrifices in the 1990s and willingness by lenders to roll over expiring bonds, adapting what was done in Eastern Europe two years ago.
“Belgium is a relevant example” in showing Greece what is “feasible and doable” in primary surplus goals, and the “Vienna initiative has mostly given us positive lessons,” Olli Rehn, the EU’s economic and monetary affairs commissioner, said in an interview yesterday at Bloomberg headquarters in New York. “The basic idea would be that banks maintain their exposure on a voluntary basis.”
Saddled with Europe’s heaviest debt load, Greece is seeking additional loans after last year’s 110 billion-euro ($158 billion) European-led package was insufficient to plug its fiscal hole. Rehn said that while debt restructuring is “off the table” because of the domino effect on European markets, alternatives such as a Vienna-style fix and so-called reprofiling were being considered.
The Vienna-style plan would aim to persuade creditors to buy new bonds from the Greek government when existing ones mature.
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