German 'wise men' call for partial Greek debt default
The German government's top economic advisors recommended Tuesday that it should support the idea of a partial Greek debt default as part of efforts to resolve the eurozone debt crisis.
The so-called "Five Wise Men", a panel of independent economic advisors to the government, said "a discount of 50 percent" on existing Greek state bonds would be desirable, easing the burden on Athens which had to be bailed out last year by the European Union and International Monetary Fund.
In a opinion piece to appear in Wednesday's Frankfurter Allgemeine Zeitung (FAZ), the advisors said Greek debt could be reduced in this way from some 160 percent of Gross Domestic Product to 106 percent.
At the same time, private sector creditors should be allowed to exchange their Greek government bond holdings for bonds issued by the European Financial Stability Facility which was set up after the 2010 Greek debt rescue.
Speaking ahead of a crunch eurozone summit Thursday on a second Greek bailout, they said that whatever it takes, Greece's debt burden has to be reduced, otherwise it will become an increasing burden on its stronger eurozone peers.
Going into Thursday's summit, Germany has insisted repeatedly that private sector creditors must play some part in the second Greek rescue, rather than let the taxpayer carry the can again.
The European Central Bank, however, opposes this plan because it fears that it will lead to Greece being declared in default on its debt by the ratings agencies, sparking a potentially much wider economic crisis.
Officials are meeting to try and resolve the differences but German Chancellor Angela Merkel on Tuesday played down the chances of an accord at the summit, saying there would be no "spectacular" overall agreement which will tame the crisis.
The Five Wise Men, nominated by the federal government and appointed by the president, are closely followed and respected in Germany for what they say about Europe's powerhouse economy.
© 2011 AFP