13 MAY 2011
By Valentina Pop
EUOBSERVER / BERLIN - Letting Greece default now rather than in a year's time would be cheaper and would help the country more than a second aid package currently under discussion, a German economist and former official with the European Central Bank (ECB) has said.
"There is a consensus now in the German economic academic community that a haircut or a partial default in Greece is necessary," Ferdinand Fichtner, an economist with the German Institute for Science (DIW) and a former ECB official told a group of Brussels-based journalists in Berlin on Wednesday (12 May).
In his view, prolonging Grecee's agony by another year would only make the inevitable haircut more expensive, as "private creditors will be more and more replaced by public ones, meaning the ECB."
"In the end, it will be more expensive for the public sector rather than the private one if politicians don't react quickly and agree on a haircut sooner rather than later," he argued.
But he admitted that among German policy makers - perhaps with the exception of finance minister Wolfgang Schauble - and ECB officials there is no consensus on letting Greece default.
One explanation, in Fichtner's view, is that the ECB has at least €50 billion of Greek government debt on its books, while Germany 'only' holds around €20 billion.
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