Eurogroup to work on private help for Greek debt: minister

10th June 2011, Comments 0 comments

Eurozone finance ministers will create a working group to hammer out ways to involve private investors in any new aid for Greece, Germany's Wolfgang Schaeuble said on Friday.

In an impassioned speech to parliament seeking to convince deputies to back more aid for Athens, the German finance minister said it was essential to act quickly to oblige private banks to do their part.

"In order to find a good solution which the European Central Bank can support, which the ECB must support, we have decided within the Eurogroup to create a working group that will assess the narrow window between involving private investors and seeing potentially negative consequences for financial markets," Schaeuble said.

He has insisted for weeks that a second rescue package being negotiated for Greece must include contributions by private creditors, banks and investment funds.

Schaeuble told the Bundestag lower house that a new package was "inevitable" and would establish "a fair distribution of risks between the taxpayer and private creditor," to send "the message that you cannot simply dump the risk on the taxpayer".

Many German deputies and taxpayers are deeply reluctant to offer another lifeline to what they see as the spendthrift Greek government.

But Schaeuble said the decision was in their long-term interest for the sake of the euro single currency, although he acknowledged that the decisions at hand were "difficult for many citizens".

A new rescue package is expected to amount to around 90 billion euros ($130 billion), following a 110-billion-euro package set up last year.

Berlin laid out its conditions this week for new aid for Greece, which would include requiring private banks to forego collecting Greek public debts for seven years.

In a letter sent to eurozone partners and made public on Wednesday, Schaeuble said an agreement could be reached "through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years."

© 2011 AFP

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