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Consider debt buy-back proposal, Juncker says

Published on 23/01/2011

Eurogroup head Jean-Claude Juncker urged European leaders to consider a proposal to help ailing governments to buy back their own debt at a discount, in remarks to be published Monday.

But Juncker, who chairs meetings of eurozone finance ministers and is also prime minister of Luxembourg, told Germany’s Der Spiegel magazine it would be a mistake to overburden the wealthiest countries to help stricken member states.

“It would be wrong to establish taboos but we should also not ask too much of the strong countries,” he said.

“Without solidity there can be no solidarity and without solidarity, we will not make any progress on solidity.”

Berlin is reportedly pushing for such a plan as a way of allowing Greece to restructure its debt with help from the 440-billion-euro (599-billion-dollar) European Financial Stability Fund (EFSF), part of a 750-billion-euro safety net put together by the eurozone, the EU and the International Monetary Fund.

It would cost Athens less to borrow money from the EFSF than it would pay to service the debt, thus helping Greece get through a debt crisis that has spread to Ireland and might threaten Portugal as well.

Athens, Berlin and Brussels have each denied such a proposal is on the table.

However Ireland is pushing for a re-negotiation of its loan terms, its finance minister Brian Lenihan has said publicly.

Der Spiegel reports in its upcoming issue that the buy-back proposal received support at a eurozone finance ministers last week and stood a “good chance” of adoption at an EU summit in March.

It also quoted a high-ranking German finance ministry official as calling it a “good idea,” days after the ministry had sharply denied the reports.

“Within the eurozone there is at present a discussion on a durable stabilisation strategy, within the framework of rules set at the European summit in December,” the ministry had said Wednesday.

“Restructuring Greek debt is clearly not contained within this framework.”