19 MAY 2011
By Arthur Beesley | Irish Times
THE DECISION of EU finance ministers to soften their opposition to any “restructuring” of Greek debt stoked fresh tension with the European Central Bank as it warned of potential “catastrophe” from such a departure.
The finance ministers opened the door on Monday night to a “soft restructuring” of Greek debt, saying the country could seek longer debt repayments from creditors if it accelerated fiscal reforms and sold state assets.
After months of resistance to any debt restructuring, some countries such as France remain deeply sceptical. However, the ministers’ move marks an effort to explore whether it is possible to give the country breathing space without triggering a full-blown default.
This prompted volleys of dire warnings from the ECB yesterday as senior policymakers said there was no way of distinguishing between default events.
ECB executive board member Lorenzo Bini Smaghi dismissed the notion of “soft” restructuring as an “empty slogan” and said there was no difference between “hard” or “soft” restructuring. “A solution for reducing debt but not paying for it will not work.”
Fellow executive board member Juergen Stark said Greek restructuring was “not the appropriate way forward” and would “create a catastrophe”.
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