Private sector creditors must take up some of the strain felt by taxpayers in bailing out Greece but default is not necessary for Athens to manage its obligations, the head of the OECD club of industrialised nations said on Tuesday.
“Greek default is not necessary, what is necessary is that the private sector participates in the solution,» Angel Gurria, head of the Organisation for Economic Cooperation and Development told a news conference in Brussels. He suggested that maturities of Greek sovereign bonds should be extended.
“We need time to avoid letting a liquidity problem become a solvency problem, to basically iron out over a period of time all the maturities,» not just for three years or five years, because that will only delay dealing with issues.
“We need time; time enough for banks to know, if, after all of this…there is a reduction needed,» he said. «Then there will be a capacity for banks to adapt and allow nominal reductions or adjustments in the size of the debt.»
He said it was not possible to continue with unlimited taxpayer-funded bailouts.
“This is not a process that can be extended indefinitely, the creditors have to contribute to the solution,» Gurria said.
“If the taxpayers of Europe are going to support Greece, or any other country, they should do so through budget support…not paying the creditors,» he said.
Gurria added that bailing out Europe?s banks would be more painful than providing assistance to Greece.
“There’s only one thing more difficult than having to support Greece, and that would be going back to support the banks a second time,» Gurria said Tuesday. «A Greek default is not necessary, what is necessary is that the private sector participates in the solution».
“It is possible to have an arrangement where the big focus is in the private sector, and an arrangement that can fit the European Central Bank, the European Union, the International Monetary Fund and ultimately the Greeks as well.»