Eurozone crisis
June 11, 2011
As Europe thrashes out how and how much of a new bailout payment should be made to Greece, Berlin's push to get private creditors on board is gaining strength.
The German government has declared itself in favor of a new bailout payment to its ailing Greek eurozone partner - but Berlin is struggling to convince the European Central Bank (ECB) and ratings agencies to allow participation from commercial banks.
Eurogroup head Jean-Claude Juncker on Saturday backed German Finance Minister Wolfgang Schäuble's proposal of a "soft restructuring" of Greece's debt.
"There will be no total restructuring," he told a German radio station, however, that there must be "a soft and voluntary restructuring.
"Creditors need to participate ... but that must happen on a voluntary basis," he said.
Juncker, who presides over meetings of the finance ministers of the 17-state eurozone, added, "You cannot impose participation by private creditors without, and against, the ECB."
Showing 'solidarity'
Germany's banks association on Saturday backed government proposals to get private creditors involved in the cost of a second bailout for Athens, although it was not clear if they favored a controversial bond swap.
Some ECB officials argued that a swap, as advocated by Schäuble, could make Greek bonds unacceptable as collateral and lead to a collapse of the Greek banking sector if it were judged a default.
As Germans worry that they will foot the bill for another bailout, Chancellor Angela Merkel stressed that Berlin had to help other countries in financial difficulty if it didn't want to see its own recovery jeopardized.
"That is why we say we cannot allow the uncontrolled bankruptcy of a country, but we must see how we can increase the competitiveness of countries which are in difficulty, how we can make it possible for them to reduce their debts, and also to show solidarity.
"We can do nothing which endangers world - and hence German - recovery," she said in her weekly video address.
Juncker also derided Germans skeptical of a new bailout, saying it was "totally erroneous [to] think that the Germans are the only paymasters."
"They are not bleeding more than others" in the affair, he said, adding that Germans and the French were the first nations that failed to meet the conditions set out in the euro's Stability and Growth Pact, which aims to maintaining fiscal discipline.
Race against time
The eurozone is currently caught in a quandary after European Union and International Monetary Fund experts warned that 12 billion euros ($17.2 billion) of emergency loans needed in July can only realistically be paid out if a new longer-term financing deal is reached at a June 23-24 meeting of EU leaders.
Despite the 110 billion euro bailout package raised last year, Greece remains some 350 billion euros in debt, as last year's recession affected government income more heavily than expected.
Author: David Levitz (AFP, AP, Reuters)
Editor: Sean Sinico