German Finance Minister Wolfgang Schäuble has warned of a real risk of bankruptcy by Greece and he has urged the EU to make private investors who hold Greek government bonds accept some losses. He would also like holders of Greek bonds to swap them for longer-dated bonds.
Schäuble reportedly said that in a letter sent to the other European finance ministers and ECB president Jean-Claude Trichet which was leaked to the media.
Germany is proposing a restructuring of Greece’s privately held debt, though done on a voluntary basis.
Economist Robert Halver with Baader Bank agrees: “We can’t just keep pumping money into Greece. Its high debts mean Greece can’t stand on its own feet. That’s why a debt restructuring is proposed now, and I hope that Mr. Schäuble’s view will be accepted.”
Greek Prime Minister George Papandreou is facing a revolt from members of his party for the austerity measures demanded by the European Union and the IMF in return for bailout money.
New figures showed how desperate Greece’s situation is. Unemployment hit 16.2 percent in March from 15.9 percent in February and has now risen by more than a third since the same month a year ago, and industrial production tumbled 11.3 percent year-on-year.
Tens of thousands of Greeks continue to hold nightly protests in central Athens against the cut backs, complaining also of corruption and state mismanagement.
On restructuring, the European Central Bank is reportedly warning to the idea of a restructuring, which would give Athens seven more years to pay off its 340 billion euro debt pile.
On Wednesday the French government repeated its steadfast opposition to restructuring.
“The French line has always been to refuse the restructuring of Greece’s debt and we are not deviating from that line, regardless of what terms are proposed,” government spokesman and Budget Minister Francois Baroin told reporters after a cabinet meeting.
But France’s Crédit Agricole – which is one of the foreign banks most exposed to Greek debt – has said that it would consider extending the period over which Athens could pay it back.