BRUSSELS (MNI) – Debt restructuring is a “last resort” and Greece
should do everything possible to avoid the “dire” consequences for
itself and its Eurozone partners, ECB Vice President Vitor Constancio
said Wednesday.
“We think that Greece has to stick to the program” of fiscal
consolidation agreed with the ECB, the IMF and the European Commission,
Constancio told reporters after participating in a conference on
European policy here.
“Greece has to take new measures and to do an effort to continue
with the program, because that’s the best for itself and also for the
euro area as a whole,” he said. “That’s very important to ensure
stability. So, of course any alternative path would be very serious and
negative, and it should not be contemplated easily.”
Experience with debt restructuring in the past shows that “the
consequences were dire in terms of further downgrades of the whole debt
of the country, in terms of difficulties of the banking sector to
finance itself and to finance the economy, deep recessions, fallout,
contagion effects, which would be even more important in the case of
Europe,” Constancio said.
“The consequence in advanced economies can be even more negative
than in other cases,” he reasoned. “We think that the utmost must be
done to avoid that path.”
As for Ireland and Portugal, “both countries should try to
overperform in the compliance with the program, because that would help
very much the countries to go back to a normal situation of hitting the
markets,” he said. “And that would of course help very much in creating
a more stable situation in Europe.”
Constancio played down the current absence of an acting director at
the helm of the IMF, noting that representatives of the Fund
participated in the meeting of Eurozone finance ministers this week and
in the ongoing inspection of Greece’s budget situation.
“The IMF is a very strong institution and so we think it is
working,” he said.
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