PARIS (MNI) – Private sector banks know they must retain their
investments in Greece in order to help solve the country’s debt crisis,
European Central Bank Governing Council member Christian Noyer said
Friday.

“I think they understand very well that they must remain present,
but that they must do it in a way that is yes, voluntary, organized of
course, and that avoids a default,” Noyer, who is governor of the Bank
of France, told French radio RTL.

He reiterated that a sovereign default by Greece must “absolutely”
be avoided. If Greece did default, it would have three serious
consequences, Noyer argued. Creditors would no longer loan to Greece;
Greek banks would suffer and would need to be recapitalized, which would
put taxpayers on the hook even more; and the ECB would no longer accept
Greek government bonds as collateral at its refinancing operations, he
said.

But Noyer expressed optimism about Greece.

“I am absolutely convinced that the solutions exist and that we
have begun to put them in place. We should not despair at all,” he said.

He said the crisis was “not a monetary crisis, not a crisis of the
euro.” Rather, it is a crisis of Greek public finances, Noyer said.

He said Greece is “a bit in paroxysm,” because of “big accumulated
deficits and a motor of growth that is insufficient because Greece has
not done the reforms it should have done to dynamize its growth.”

With the right structural reforms, the country can “multiply the
opportunities for growth,” he said. “There are chances for growth that
have not been implemented.”

He noted that European authorities were in the process of deciding
on a new bailout program that will last three years “and will be
sufficient to put Greece back on its feet.”

For the EU as a whole, Noyer said countries must not be satisfied
with reducing their public deficits to the 3% of GDP required by
statute. They should strive for budget balance, and to produce
surpluses, he said.

Noyer rejected any notion that France’s fiscal challenges could
make it another Greece.

“We are not at all experiencing what Greece is experiencing, for
many reasons,” he said. He noted that France had already implemented
many reforms, the biggest of which was raising its retirement age. It
also has a “solid” banking system, he said.

“We have circumstances, characteristics, that are very different,”
Noyer said. “But we need to be very careful” and strictly follow the
planned path of budget consolidation.

–Paris newsroom, +331-42-71-55-40; bwolfson@marketnews.com

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