FRANKFURT (MNI) – European Central Bank Governing Council member
Athanasios Orphanides called on European leaders to reverse their
decision to have private holders of Greek sovereign bonds take losses,
arguing that the Eurozone as a whole would benefit from such a reversal
of policy.
In a piece that ran on the Financial Times’ website late Thursday,
Orphanides, who heads the central bank of Cyprus, wrote that, “reversing
the Greek PSI decision would help to restore trust.”
He said the decision of EU leaders to force losses on private
creditors, both in Greece and more generally, was largely to blame for
the subsequent blowout of spreads in other Eurozone countries.
Private bankers are currently negotiating with officials in Athens
on a plan that would cut the nominal value of about E205 billion in
privately-held Greek bonds by 50%. While some reports have suggested a
deal is near, others have cited the recalcitrance of some creditors to
participate – particularly those who are holding credit default swaps
against their Greek bonds and would therefore have an incentive to
provoke a default in order to get their money back in full.
Orphanides conceded that reversing the Greek PSI decision would
lead to higher financing costs for Athens. However, “by restoring trust
in the Eurozone, it would reduce the financing cost of other Eurozone
governments,” he wrote. “The key is to restore trust.”
The central banker also said that a 30-year low-interest loan to
the Greek goverment, in addition to reversing Greek PSI, could help
prevent Greece’s borrowing costs from rising too high.
[TOPICS: MT$$$$,M$X$$$,M$$EC$,M$$CR$,MGX$$$]
