France warns debt moves may leave EU with Greek bill
France's central bank chief warned on Tuesday that the eurozone risks having to finance all of Greece's economy if it forces a modification of Athen's debt and the country is declared in default.
France has been a leading backer of the European Central Bank, which has opposed calls by Germany for pushing private investors to accept delayed payment on Greek government bonds as part of a second bailout for the troubled eurozone member.
"If a solution can be found that avoids the risk of a default, that would be acceptable to us," said Bank of France Governor Christian Noyer.
"If one can't be found and you touch the debt anyway and provoke a default or a 'credit event', then you better be prepared to finance the entire Greek economy," he added.
A credit event is considered to be a modification of initial borrowing conditions and usually triggers downgrades if not a default rating by credit agencies.
The ECB has warned this could have unpredictable and damaging effects throughout the entire 17-member eurozone.
The EU and eurozone are working on several different mechanisms to involve the private sector in helping to cover part of the over 80 billion euros ($115 billion) in additional financing Greece is expected to need in the coming three years.
© 2011 AFP