June 7, 2011
European Central Bank President Jean- Claude Trichet signalled for the first time he may support encouraging investors to buy new Greek bonds to replace maturing securities as officials seek to stem the nation’s debt crisis.
While Trichet said he’s against imposing losses on creditors, he indicated he’d approve of financial institutions maintaining their level of outstanding credit. “That is not a default,” he said at an event in Montreal late yesterday. “That is something the ECB would consider appropriate.”
ECB policy makers have opposed any measure that could be classed as a default to avoid what European Union Economic and Monetary Affairs Commissioner Olli Rehn described yesterday as a “Lehman Brothers catastrophe.” The ECB is considering a rollover of bonds as an alternative means of easing Greece’s funding squeeze, two officials familiar with the matter said last week, on condition of anonymity.
The euro rose against the dollar after Trichet’s comments and traded at $1.4666 as of 12 p.m. in London, up 0.6 percent on the day. The yield difference, or spread, between 10-year Greek bonds and German securities of a similar maturity was at 1,286 basis points today, up from 1,282 yesterday.
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