Wall Street Journal
June 5, 2011
Support among European governments is building for a plan calling on Greece to ease its cash crunch by proposing a debt exchange to its private-sector creditors—probably triggering what would be the first default of a euro-zone nation in the common currency's history.
The governments have concluded that Greece, propped up last year with a €110 billion ($161 billion) loan package, will need more cash as soon as next spring. The debt-exchange proposal, championed by Germany and with the strong support of several other euro-zone nations, would ease the amount of extra money those countries have to put up, according to senior euro-zone officials.
The plan was discussed at a meeting of euro-zone finance-ministry officials in Vienna last week, and senior euro-zone officials said Saturday that there was a tentative agreement to give Greece more financing—and that aid would likely come on condition that private-sector creditors also bear some of the burden.
Plunging Greece into default—even briefly—is a difficult step, and the plan would be subject to approval at a political level by finance ministers, and ultimately by national leaders themselves at a summit later this month. France, for instance, has been wary of burning private creditors, and even German officials admit the deal would be difficult to push through.
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