Frankfurt (MNI) – Eurozone governments must strengthen weak banks
to limit contagion risks from a potential Greek debt restructuring, Bank
of England Monetary Policy Committee member Adam Posen said in an
opinion piece published Friday.

Member states must “address the problems of their banks directly
and solve them permanently,” Posen wrote in the German business daily
Handelsblatt.

“At the moment, however, politicians in Germany and elsewhere are
refusing to recognize banks’ losses and to accept the necessary
recapitalization,” Posen asserted.

Only when banks are strong and enjoy sufficient capital buffers
will markets be able to differentiate between the risk of Greek
restructuring and the situation elsewhere in Europe, he argued.

When their own banks are less shaky, creditor countries would also
have a stronger negotiating position vis-a-vis debtor countries, he
added.

— Frankfurt newsroom: +49-69-720142; email: jtreeck@marketnews.com

[TOPICS: M$X$$$,M$$BE$,M$$CR$,M$G$$$]