–Adds Comments On Risks Associated With Greek Default
FRANKFURT (MNI) – The European Central Bank is not in favor of
restructuring or haircuts on Greek debt, but a Vienna Initiative type
solution may be acceptable, ECB Governing Council member Mario Draghi
said Wednesday.
“We call for the avoidance of any credit events,” Draghi told the
European Parliament. During his ECB presidential candidacy hearing, he
told the Committee on Economic and Monetary Affairs that he fully shares
the central bank’s official line.
Draghi warned that a default would carry significant costs as well
as severe contagion risks that are impossible to predict. “We haven’t
yet learned how to manage a sovereign default,” he warned.
“If there is a credit event, then all the actors should know that
the default is not without consequences. The Greek banks will need to
be recapitalzed. Are we ready? We should be aware of the costs,” Draghi
said.
“There are basically two initiatives that are under discussion,” he
said. “One is the Vienna Initiative, which looks entirely voluntary.
Another one is a debt exchange, which I haven’t understood whether it is
voluntary or it could end up being involuntary.
Asked about his view on a common Eurozone bond, Draghi said that “a
union bond is something completely legitimate to think about once we
have a closer union.” A closer political union is a pre-requisite for
shared debt, he argued.
For now, the Eurozone needs to strengthen the union by reinforcing
its rules rather than thinking about additional institutions or even
shared budgets, Draghi said.
–Frankfurt newsroom, +49-69-720-142; frankfurt@marketnews.com
[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]
