Bloomberg
July 22, 2011
Jean-Claude Trichet said the European Central Bank may be able to accept Greek collateral in the event of a default because euro-area states have agreed to provide guarantees.
Speaking in Brussels after euro-area leaders agreed on a 159 billion euro ($229 billion) plan to stem the Greek debt crisis, ECB President Trichet said heads of government had agreed to back Greek bonds up to the value of 35 billion euros in refinancing operations in the event that the country is judged in default on its loans.
“We have to lend to sound counterparties, and we will have the backing for our own refinancing operations,” Trichet said. “I can tell you that the amount of capital that has been accepted by heads of state and governments is 35 billion euros.”
Prompted by the worsening of the debt crisis that has threatened to engulf Italy, leaders empowered their 440-billion euro rescue fund to buy debt across stressed euro nations after eight hours of talks in Brussels, and risked default by persuading private sector investors to help foot the bill. The ECB softened its stance on a default, which may be declared by credit rating companies if the debt swaps and buybacks occur.
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