June 10, 2011
European Central Bank President Jean-Claude Trichet rejected any direct ECB participation in a second bailout for Greece, escalating a clash with governments as they rush to craft a solution involving investors.
As politicians try to find a plan by June 24 that would share the cost of a new rescue with bondholders, Trichet yesterday ruled out the Frankfurt-based ECB setting an example with its own assets. While the bank has said it could accept a plan in which investors voluntarily agree to buy Greek bonds to replace maturing debt, Trichet said the ECB has no intention of rolling over its own Greek holdings.
Sustained ECB resistance could leave politicians facing the prospect of asking their taxpayers to finance a Greek budget shortfall that may amount to 90 billion euros ($130 billion) through 2014. Trichet also warned against an approach advocated by German Finance Minister Wolfgang Schaeuble that would pressure investors to accept longer maturities on their Greek bonds, saying any solution forcing private-sector involvement amounts to a “credit event” and would be an “enormous mistake” for the euro region.
“Trichet is really digging his heels in now,” said Tobias Blattner, an economist at Daiwa Capital Markets Europe in London who worked at the ECB until April. “The ECB has already shouldered the main burden of the crisis. These are the same politicians that dithered last year and got the ECB to pick up the pieces.”
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