January 26, 2012
International Monetary Fund chief Christine Lagarde said Greece's public-sector creditors may have to take a hit on their loans if private lenders can't agree on a restructuring plan that goes far enough to make the country's debt sustainable.
"The bigger the private effort, the smaller the participation of public creditors will need to be," Ms. Lagarde said. "If the level demanded of private investors isn't reached, then public creditors will have to step in too."
Greece's principal public creditors are the European Central Bank and euro-zone governments. After Ms. Lagarde's remarks, the IMF said in a statement that it "has not asked the ECB to play any specific role." The fund said it has "no view" on the relative combination of private- and public-sector contributions, but sees it as "essential" that any Greek deal brings the nation's debt down to 120% of gross domestic product by 2020.
An ECB spokeswoman declined to comment. The ECB has opposed taking haircuts on its Greek bond holdings, and has repeatedly said that it won't take part in any debt-restructuring talks and that it will hold its Greek bonds until they mature. Many ECB officials would likely view losses on their Greek holdings as a violation of the central bank's founding treaty, which forbids it from financing governments.
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