ECONOMY

New chapter for Greek economy

A new chapter is opening for the Greek economy as European Union leaders in Brussels look at a more comprehensive plan to put an end to the region?s debt problems, according to investment bank UBS.

In an report dated February 4, the Swiss-based bank said that it doesn?t believe Greece will leave the eurozone, adding that it sees Athens restructuring its debt with a possible haircut on the cards.

The report follows comments from Citigroup economist Willem Buiter, who was cited as saying that Greek debt needs to be reduced by half.

?Financial reasons dictate the immediate need to restructure Greek debt but political reasons have made a delay necessary in order to complete measures that will handle shocks caused to the banking system,? he was cited as saying by the Athens News Agency.

Meanwhile, the German boss of top US investment bank Goldman Sachs called for Greece?s debt to be partially forgiven in order to save the ailing nation from possible bankruptcy.

?An insolvent Greece must not happen. There must therefore be a rescheduling or a restructuring of the Greek debt burden. There is probably no way around it,? bank boss Alexander Dibelius told Germany?s daily Bild.

His comments come as Chancellor Angela Merkel prepared to reveal her much-anticipated paper for eurozone reform to fellow leaders at a lunch in Brussels on Friday.

Rescheduling or restructuring would mean creating new loans for Greece on more generous terms than the present loans, with the aim of restoring Greece?s creditworthiness, though at a cost to European partners such as Germany that would finance the loans.

Dibelius said that even though Greece generated just 2 percent of Europe?s total economic output, it had become a symbol for the euro-debt crisis and therefore could not be allowed to fail.

?We must not forget that Germany has so far profited much more from the euro than the debt crisis has cost it. The benefits are so enormous, Germany is so strong today, that it could almost theoretically afford a restructuring of Greece on its own,? he said.