ECB economist wants end to 'fruitless' debate on Greek aid.

10th June 2011, Comments 0 comments

European Central Bank chief economist Juergen Stark called Friday for an end to what he called a "really fruitless discussion" on private sector involvement in a second Greek rescue package.

"I think it's time to stop this really fruitless discussion and to concentrate on the real issues," Stark told reporters on the sidelines of a banking conference in Frankfurt.

"The real issue is the programme for Greece and to implement the programme in full," he added.

The economist spoke in reference to a dispute between the ECB and Germany in particular, which wants private investors to participate along with taxpayers in a second plan to rescue Greece.

The ECB rejects this position because it says that it would result in heavy losses by banks in Greece and elsewhere and trigger a de-facto default that would roil financial markets.

A declaration of default by international ratings agencies would mean that the central bank could no longer accept Greek goverment bonds as collateral against loans, which would choke off crucial funding to struggling commercial banks.

"This prevents us from continuing accepting Greek bonds as eligible collateral," Stark said, "it's as simple as that.

"For this reason policymakers should know what they are talking about" when they insist on actions that might have unforeseen consequences, the economist concluded.

© 2011 AFP

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