ECB digs in heels over restructuring

The European Central Bank will not soften its strong opposition to a Greek debt restructuring, outgoing Executive Board member Gertrude Tumpel-Gugerell said on Tuesday.

Tumpel-Gugerell told Reuters that giving Greece more time to pay back its debts would amount to a default no matter how it was presented.

Asked whether a full restructuring of Greek debt or the milder reprofiling that has been touted recently was an option the ECB could live with, she strongly rebuffed the idea, saying: «It is not an option.”

Asked whether the ECB might soften its stance once the European Commission, International Monetary Fund and ECB had sat down with the Greek government after the latest assessment of Athens’ progress, she was equally clear. «It is not the case.”

She declined to comment on whether a debt rollover — private investors voluntarily agreeing to buy more Greek debt once current bonds expire — might satisfy the ECB.

A number of top ECB policymakers have been deliberately blunt in their warnings of the consequences of a Greek debt restructuring in recent weeks.

Jurgen Stark and Jose Manuel Gonzalez-Paramo have both said it could be more damaging than the collapse of Lehman Brothers, while Lorenzo Bini Smaghi has warned it would be a death sentence for the Greek banking system.

Mario Draghi, who is widely expected to be the next president of the European Central Bank, said Tuesday that euro-zone governments that support partners in the currency area are doing so with «stringent conditions» and the support «is not a fiscal transfer between countries.”

Referring to the sovereign debt crisis in Greece, Ireland and Portugal, Draghi said the right response lay «first and foremost» in national policies and the «complete implementation» of adjustment plans that have been agreed on.

Troubled government debt loads of those three countries «can potentially have significant systemic effects» on a global level, he said.

Draghi, who is governor of the Bank of Italy, made the remarks in his «concluding remarks,» at an annual speech in Rome.

Recovery from the brink is possible, he said, noting that Italy in the early 1990s had to sell government bonds worth 10 times Greece’s current annual borrowing requirement and twice its value in relation to gross domestic product. Italy managed without assistance from abroad and thanks to a large-scale privatization program–which Draghi helped engineer as a senior Treasury official at the time.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.