Top EU Official: Greece Debt Restructuring 'Is Not Part Of Our Strategy'

BRUSSELS (AP) -- The EU's top economic affairs official says a restructuring of Greece's massive debt is not on the table.

Monetary and Economic Affairs Commissioner Olli Rehn said Monday that a debt restructuring for the struggling country "is not part of our strategy and will not be."

Rehn said proponents of restructuring -- cutting the total amount of money Greece owes or giving it more time to repay -- appear to be unaware of the risks to overall financial stability such a move would entail.

European officials have warned that a restructuring of Greece's debt could lead to panic on financial markets similar to the turbulence following the collapse of Lehman Brothers in 2008 and drag down banks and other struggling eurozone countries.

Comments

[joe kim]

02:34 PM on 05/02/2011

So it is better for them to default? I guess I don't understand.

So Greece has to declare bankruptcy and reorganize?

Someone explain what would happen in this scenario.

[GeorgieMark]

03:09 PM on 05/02/2011

"Someone explain what would happen in this scenario. "

No one really knows. Olli Rhen doesn't know, Jean Claude Trichet (the head of the European Central Bank) doesn't know and Greece doesn't know either.

They can only project.

Greece would have defaulted last May when 20 billion euro worth of debt matured and it was unable to repay a single cent.

They are trying to reduce their deficit and debt but they are not very successful

The bailout was in retrospect a mistake. Now the situation is far more complicated and no one knows how to disengage.

Under the bailout plan the ECB was forced to accept Greek bonds (basically junk bonds) as collateral, this is a huge blow as the ECB is risking its own financial well-being and if Greece defaults the ECB has to start writing down losses. Consequentially that will affect the Euro-rate vis-a-vis other currencies. Furthermore by forcing the ECB to accept Greek bonds Eurzone members have tarnished the reputation of the ECB as institution whose main objectives are economic rather than political

Eurozone member countries risk losing anywhere between 40-110 billion (the bailout)

Banks across Europe especially French and German banks who have Greek bonds in their portfolio will also be affected.

As for Greece itself if it does eventually default (and there is little doubt in my mind that it will) they will be ejected from the Eurozone plunging the country into a deep depression for a long time.

[becky bradshaw]

06:58 PM on 05/02/2011

"While Iceland, Ireland, Greece, Portugal, and Spain — and a growing list of other countries — struggle under the burdens of reckless loans, foreign banksters, the institutions of global finance, and the other ruthless players in the game of disaster capitalism, another country once took a different route.

Instead of shackling its future to a regime of endless repayment, Argentina took a different route, default.

And guess what? The world didn’t end, and the country’s economy took off."

http://richardbrenneman.wordpress.com/2011/04/10/default-sometimes-it%E2%80%99s-a-very-good-idea/

[bungerman]

01:03 PM on 05/02/2011

no more financial panic please. Wall Street is already full of drama queens.