PARIS (MNI) – It may be necessary to shield Greece from financial
markets for somewhat longer than planned, but debt restructuring should
be avoided at all costs, European Central Bank Governing Council member
Christian Noyer said Thursday.
If all elements of the consolidation program are applied, “our very
strong conviction on the Council of the European Central Bank is that
Greece should come out of it,” the governor of the Bank of France said
in a radio interview.”
“The program will perhaps be extended a bit” beyond 2012, Noyer
said, noting that this is under discussion with the IMF and the European
Commission. “It’s no doubt useful and necessary.”
While the program is “difficult”, it “can be done,” he insisted,
citing the “enormous” potential of the government to recover taxes,
privatize public assets and bolster growth through structural reforms.
The alternative of reneging on its debt would be a “catastrophic
solution”, since most of the debt is held by domestic banks and funds,
which would in turn have to be bailed out by the state, he said.
“The next day, no one would lend any more to Greece,” he predicted.
The cost to the population would be “ten times more drastic” than the
adjustment program under way, he added.
Moreover, the resulting panic in the markets could “greatly”
increase pressure on other Eurozone countries with fragile finances, he
At the same time, Noyer played down the risk of default for French
banks as “absolutely not worrisome,” since their exposure is “very low”
in comparison to total assets and earnings.
In addition, the ECB could no longer accept Greek paper for
refinancing, Noyer warned. “It’s not a threat,” he explained, noting
that the ECB has accorded exceptional eligibility to the country’s
banks. “We would have no choice.”
“Restructuring of Greece’s debt would have dramatic consequences,”
In the face of mounting scepticism, Noyer pointed to the adjustment
plans for Ireland and Portugal, which are “very credible.”
–Paris Newsroom, +331 4271 5540; firstname.lastname@example.org