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Berlin calls on Greece to restructure debt

The Local · 14 May 2011, 09:09

Published: 14 May 2011 09:09 GMT+02:00

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Citing unnamed sources, newspaper Die Welt reports that the International Monetary Fund (IMF), the European Union executive arm and the government in Berlin believe prolonging the repayment terms on some loans to Greece has become the least worst option to save the country from defaulting.

"When you look at the new data, you know the situation has changed," a European Commission source was quoted as saying.

However the European Central bank and France remain opposed to any such debt restructuring, the article added.

EU Commission spokesman on economic affairs Amadeu Altafaj, dismissed the report as "absurd information."

"A restructuring of Greek debt is out of the question," he told news agency AFP.

A German finance ministry spokesman simply restated Germany's position of recent days, that Berlin is awaiting the results of a mission to Greece by experts from the European Union, IMF and ECB, before reaching its conclusions on the way forward on the debt issue.

The team of rescue auditors launched their new probe in Greece Tuesday and will advise whether Greece merits a critical new slice of rescue funding.

Speculation has mounted in recent days that Greece will need an additional €60 billion ($85 billion) over the next two years as it won't be able to return to financial markets next year as expected to re-finance its massive debt.

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Eurozone and EU finance ministers are expected to discuss Greece at meetings on Monday and Tuesday.

Athens received a €110-billion ($156-billion) bailout from the EU and International Monetary Fund last year, but a severe recession has complicated its efforts to bring its finances in order.


The Local (news@thelocal.de)

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Your comments about this article

10:03 May 14, 2011 by Bushdiver
Blah, blah, blah. Greece will never be able to repay the money borrowed and to give them any more would be rediculis. I say go back to the way it was before the Euro. These kind of problems would no longer exist.
23:56 May 14, 2011 by nemo999
If Greece defaults on the Bonds, or even if the Bond holders take a haircut, the next issue is that the banks that hold these notes will no longer meet the capital requirements of Bassel III, and a whole new round of banking instability will start. Everyone is playing for time, and praying for a miracle. The French and German Central Banks hold a significant portion of the Greek debt. This debt is held either directly on their central bank balance sheets, or indirectly on their balance sheets via banks that are based and chartered in their countries holding the debt.

The problem would still exist even if there was no Euro, may be not to such an extent, given that the risk of currency fluctuation would have to be accounted for and therefore force a higher interest rate on the bond. This higher interest rate might have forced the Greek government to reduced the amount of bonds that were issued. Instead of being denominated in Euro's, the bonds would be denominated in Drachma. If the debt were denominated in Drachma, the Greek government would have one additional path open to them to handle this debt, and that would be to inflate their currency.

Could the current debt be restated or restructured from Euro's to Drachma?

It is a bad situation, that is only being made worse by waiting.
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