European Bankers Meet to Refine Greek Debt Plan

New York Times
July 6, 2011

Bankers and government officials continued to push Wednesday for a way to get banks to contribute to Greek debt relief, despite opposition from the European Central Bank and warnings from rating agencies that plans discussed so far would be considered a default.

Even if rating agencies declared Greece to be in default, it might be possible to design a plan where the country would emerge from default within days or even hours, said a senior German official, who could not be identified because of the sensitivity of the matter.

Officials hope such a controlled default might ease Greece’s debt burden while minimizing the risk of unleashing unpredictable market forces. Some bankers have warned that a decision by Greece not to repay the full value of its bonds could touch off a panic that would rival the collapse of Lehman Brothers in 2008. The European Central Bank has said it would oppose any plan that was not completely voluntary.

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