JANE BURGERMEISTER REPORT: ‘ECB ENDGAME: German government insists on Greek reprofiling, warns of insolvency’
Berlin Warns of Possible Greek Insolvency
German Finance Minister Calls for Athens Debt Restructuring
In a letter sent to the European Commission, the European Central Bank, the International Monetary Fund and euro-zone countries, Germany’s finance minister warns of the possibility of a Greek bankruptcy and concedes the current bailout plan has failed. Instead he is calling for a de facto debt restructuring. Resistance within Merkel’s conservatives is stewing.
The German government has conceded for the first time that Greece will soon need billions of euros in fresh aid and a restructuring of its debt in order to prevent bankruptcy.
In a letter dated June 6 and obtained by SPIEGEL ONLINE, sent by Wolfgang Schäuble to his European Union counterparts, the president of the European Central Bank (ECB), Economic Affairs Commissioner Olli Rehn and acting International Monetary Fund (IMF) head John Lipsky, the German finance minister admits that the current EU, ECB and IMF rescue plan for Greece has failed.
In the letter, the finance minister states that private investors and banks should take over part of the cost of stabilizing Greece. The letter states that the private sector should make a “quantifiable and substantial contribution.” The finance minister’s preferred course would be a bond swap in which old government bonds would be exchanged for news ones with more favorable terms. Investors would be asked to exchange all the Greek bonds currently in their portfolios for new ones with maturities extended by seven years. Investors would get their money later, but they would still get the full amount.
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