German Finance Minister Wolfgang Schauble says that Greece should be given more time to sort out its public finances and warned that a restructuring of its debt would be ?catastrophic.?
“At the time being, it appears as if Greece will need more time,» Schauble said in an interview with Germany’s Handelsblatt newspaper.
The European Union is currently discussing the possibility of extending the maturities on Greece?s loans.
Schauble rejected the idea of banks being forced to accept writedowns on their holdings of Greek government debt. «It’s really not about doing the banks a favor?we all have an overriding interest in a functioning financial system,» he said.
Schauble said that the consequences of a Greek debt restructuring for the banking system could be even worse than the panic caused by the 2008 collapse of Lehman Brothers.
“It could lead to all debts coming due immediately, with the corresponding consequences for Greece’s solvency,» he said. «If Greece were insolvent … the consequences could be more catastrophic than those after the collapse of Lehman Brothers.»
The German finance minister suggested the EU should be more creative in helping to solve Greece’s problems, beyond offering financial aid. ?It is true that in the European Union we have not yet explored all the scenarios to help Greece.”
EU-backed investments could help the Greek economy recover, for instance by putting money into renewable energy projects, he said.