BERLIN (MNI) – A default by the highly indebted Eurozone member
state Greece would have “incalculable consequences” for financial
markets, Eurogroup Chairman Jean-Claude Juncker warned in a newspaper
interview published Sunday.

“A default followed by a [debt] restructuring would let a ghost out
of the bottle from which we would not know where he would fly to,” the
Luxembourg Prime Minister told the German weekly Der Spiegel.

Juncker said in the interview he would advise the “utmost
restraint” on the idea of having private creditors shoulder part of the
cost of the debt crisis.

A so-called soft restructuring, a lengthening of Greek debt
maturities, “would only be the very last step in a very long process,”
the Eurogroup chairman told the magazine.

Juncker said he could understand that European Central Bank
President Jean-Claude Trichet is “very cautious” regarding a
restructuring of Greek debt because this could have a contagion effect
on other Eurozone countries.

“That is why a soft restructuring can only be considered in certain
cases under certain conditions,” the Eurogroup leader was quoted by the
magazine. It has to be assured that the rating agencies don’t value a
soft restructuring as being a default, he stressed. Otherwise, this
would hit banks hard and would carry incalculable risks for capital
markets, he warned again.

Meanwhile, German Finance Minister Wolfgang Schaeuble told the
German weekly Bild am Sonntag (BamS) in an interview published Sunday
that further aid for Greece “is only conceivable if it is confirmed
that private creditors, like banks, do not pull out of Greece and leave
European taxpayers responsible for everything.”

Moreover, only if it is sufficiently certain that Greece will be
able to overcome its problems “could we, if necessary, ponder on
lengthening [the maturity of bonds] which Greece has to repay next
year,” Schaeuble said in the interview.

Asked about the strong opposition of the ECB against a possible
restructuring of Greek debt, Schaeuble told BamS that “under no
circumstances must there arise a conflict with the European Central
Bank.”

ECB Governing Council member Jens Weidmann warned Friday that
reprofiling Greek bond maturities would make it impossible to accept
them as collateral for the ECB’s refinancing operations and thus cut a
large part of the Greek banking system off funding.

The comments by the German Bundesbank president echoed those of ECB
Executive Board member Juergen Stark from earlier last week.

Juncker said in the Spiegel interview he was convinced that with
joint efforts it will be possible to get Greece out of the crisis. He
urged Greece once more to speed up the planned privatisation of state
assets.

The Eurogroup chief said the Greek government should establish a
trust agency tasked with selling off state assets modeled after the
organization that privatized former East Germany’s public property.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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