–On Possible ECB Greek Bond Haircut, Says “Question Is Open”

PARIS (MNI) – It is in everyone’s interest to avert a debt default
in Greece, Eurogroup President Jean-Claude Juncker said in an interview
released Thursday, without openly calling on the ECB to accept a haircut
on its holdings of Greek debt.

“There is no default without contagion,” the prime minister of
Luxembourg told the French daily Le Figaro.

“I won’t criticize [Greek] Prime Minister [Lukas] Papademos,”
Juncker said. “There is real fatigue among Greek political leaders in
pursuing the reform course. The recession has been worse than the
European Union expected.”

“We are asking the Greeks not to give up, to decide on their
priorities for consolidation in the coming days or weeks — in short not
to jeopardize their EU and IMF aid,” he said.

Asked whether the ECB should participate in the rollover of Greek
debt by accepting a haircut on its holdings, Juncker suggested that the
issue was debatable: “The question is open, but it would not be wise for
the president of the Eurogroup to invite the ECB to orient its policy in
one way or another.”

However, he then noted, “Other public creditors play a rather
secondary role.”

Juncker argued that Germany alone cannot resolve the financial
problems in the Eurozone. “Its room for maneuver is not as large as many
believe. It’s all a question of economic governance in Europe. Absolute
national sovereignty no longer applies. If we can agree on who does
what, when and how, Germany will find its place.”

While noting that financial market tensions have abated somewhat,
Juncker cautioned that the crisis was not over. “All countries recognize
the need to consolidate their public finances. But there remains a
serious problem: we do not have a strategy for growth at the European
level.”

What is needed is a European accord for “intelligent austerity that
does not throttle growth,” he added. The money is there to bolster
growth and employment, “but it is not deployed well.”

The objective of the summit of EU leaders next Monday is “to
identify areas of potential growth and mobilize European regional,
social and structural funds as well as possible,” he said, adding that
“no spectacular decisions” or quantitative measures were likely to
emerge from the meeting.

–Paris newsroom, +331 4271 5540; email: ssandelius@marketnews.com

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