The financial sector should play a bigger role in helping to resolve the Greek debt crisis, European Commission president Jose Manuel Barroso said on Tuesday.
Speaking to reporters in Brussels, Barroso said that rescuing Greece should not just be left to governments and that banks should also be involved.
The Commission chief said: We believe that the private sector could play a role in helping Greece, provided that it doesn’t result in a credit event or default. Of course, it should be done in agreement with the European Central Bank.”
The plan would be that when existing Greek government bonds mature, banks would lend the proceeds back to Athens.
The question is whether investors could be convinced that they had any chance of seeing their money back, as economist Pierre Defraigne explained.
If we ask banks to do something which amounts to rescheduling or even a restructuring of debt, that is a default. We would need to convince shareholders to agree. They would seek reassurances from the management that they won’t lose out as a result of their exposure to Greek debt,” Defraigne told euronews.
While France and Germany have pushed for greater private sector involvement to reduce the burden on government, the ECB opposes that move because ratings agencies warn they would see it as a default and downgrade Greece’s outlook once again.
That could mean the ECB would no longer accept Greek government bonds as collateral.
Our correspondent asks whether the banks, hedge funds and investors could come up with a solution to the Greek crisis.
But how willing they are to help rescue Athens would depend if they see default as being far worse.