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Germany fears `full-blown bankruptcy inside the eurozone`
Date 08/06/2011 21:50  Author webmaster  Hits 1121  Language Global
8 JUN 2011

By Andrew Willis

EUOBSERVER / BRUSSELS - German finance minister Wolfgang Schaeuble believes Greek bankruptcy is imminent, according to a leaked letter, and argues that restructuring of the country's debt is necessary.

"We are standing before the real risk of the first full-blown bankruptcy inside the eurozone," Schaeuble said in a letter addressed to European Central Bank president Jean-Claude Trichet and leaked to the German press.

In the starkest language yet by a European official, the German minister called for additional aid to be made available to Greece, adding that private banks should participate in the cost of the Greek rescue.

EU officials and member states are understood to be currently working on a second bail-out agreement for Greece, in addition to the €110 billion pledged last year, with estimates suggesting the new aid package could total €60 billion.

Finance ministers are expected to reach an agreement on 20 June, just three days before a summit of European leaders, with Schaeuble suggesting that private creditors should be made to wait an extra seven years before repayment of their existing Greek loans.

"Any agreement on 20 June has to include a clear mandate - given to Greece possibly together with the IMF - to initiate the process of involving holders of Greek bonds. This process has to lead to a quantified and substantial contribution of bondholders to the support effort, beyond a pure Vienna initiative approach," reads the letter.

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