Eurogroup chief Juncker backs 'soft' Greek debt restructure

11th June 2011, Comments 0 comments

Eurogroup head Jean-Claude Juncker on Saturday backed Germany's proposal of a "soft restructuring" of Greece's debt with a voluntary contribution from private-sector creditors.

"There will be no total restructuring," he told a German radio station. "The governments are agreed on that, ECB support for such an option could not be obtained."

"There must be a soft and voluntary restructuring," the Luxembourg prime minister told RBB radio. "Creditors need to participate ... but that must happen on a voluntary basis."

Juncker, who serves as president of the group comprising the finance ministers of the 17-state eurozone, added: "You cannot impose participation by private creditors without, and against, the ECB."

The European Central Bank has until the end of the month to decide a second bailout for Greece but remains divided over the role of the private sector.

Germany wants a second rescue package to include contributions by private creditors, banks and investment funds as the price of Berlin's involvement.

Diplomats say the need is estimated at more than 90 billion euros -- one-third to come from eurozone nations and the IMF, one-third from sell-offs of Greek state assets and the final 30 billion or so from the bank rollovers.

The latter two components are uncertain, and it is also uncertain whether the headline 90 billion figure includes remaining tranches of the existing 110 billion euro ($160 billion) package mustered last year.

Despite the landmark bailout, Greece's 350-billion-euro debt load has only got heavier as a deeper-than-expected recession last year weighed on government income.

The European Commission said Friday it was considering "the feasibility of a voluntary debt rescheduling or reprofiling," while heeding ECB warnings to avoid sparking alarm on markets.

The eurozone is locked in a race against time after European Union and International Monetary Fund experts warned that 12 billion euros of emergency loans needed in July can only realistically be paid out if a new longer-term financing deal is sealed at a June 23-24 meeting of EU leaders.

Asked about German reluctance to help Greece once again, Juncker said it was "totally erroneous (to) think that the Germans are the only paymasters."

"They are not bleeding more than others" in the affair, he said, recalling also that the Germans and the French were "the first to fail to respect the Stability (and Growth) Pact" aimed at maintaining fiscal discipline.

German Chancellor Angela Merkel said meanwhile that Berlin had no option but to help other countries in financial difficulty or its own recovery might be jeopardised.

"That is why we say we cannot allow the uncontrolled bankruptcy of a country, but we must see how we can increase the competitiveness of countries which are in difficulty, how we can make it possible for them to reduce their debts, and also to show solidarity."

"We can do nothing which endangers world -- and hence German -- recovery," she said in her weekly broadcast address.

© 2011 AFP

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