France warns debt moves may leave EU with Greek bill

14th June 2011, Comments 0 comments

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

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