Financial Times
June 9, 2011
Jean-Claude Trichet, European Central Bank president, has escalated his dispute with Berlin over a fresh international bail-out for Greece, after making clear he sees no scope for forcing a contribution from holders of Greek government bonds.
Eurozone governments had to avoid Greece being deemed in default or a “credit event”, Mr Trichet warned on Thursday. Any private sector involvement had to be voluntary and without any element of coercion.
His comments were a riposte to Wolfgang Schäuble, Germany’s finance minister, who has demanded a “quantified and substantial contribution” by bondholders as a condition of German support for a new aid programme. They threatened to intensify already acrimonious negotiations over the composition of the package, which could be as big as €170bn ($247bn) between now and 2014.
Mr Trichet did not exclude a voluntary debt rollover, in which maturing securities were replaced with new bonds – but the ECB was not actively backing such a move. Instead, he urged private sector involvement through privatisations and foreign direct investment.
Earlier, Moody’s, the rating agency, indicated even a debt rollover would be declared a default. “It is hard to imagine something that is truly voluntary in the current environment,” Bart Oosterveld, head of its sovereign risk group, said.
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