ECB Asmussen Nixes Haircut On Greek Debt Held By Public Sector

Author: Market News International | Category: News

BERLIN (MNI) – European Central Bank Executive Board member Joerg Asmussen
in a newspaper interview pre-released Sunday said he opposed a haircut on Greek
debt held by the public sector.

“In order to close the financing gap we need a package of measures which
contains, amongst other things, a significant cut of interest rates on the
rescue loans and a bond buyback by Greece,” Asmussen told German daily Bild in
an interview to be published in its Monday edition.

“A debt haircut is not part of it,” he stressed.

Asmussen, a German national, said he hoped that eurozone finance ministers
will come to an agreement at the Eurogroup meeting on Monday to de-block the
next rescue loan tranche to Greece.

“In order for this to succeed everyone has to move,” the central banker
said. Greece urgently needs the next loan tranche, he remarked, adding that the
future of the country in the eurozone is at stake.

German government spokesman Georg Streiter said Friday that “one can be
relatively optimistic looking forward to Monday, because it is not about
problems with regards to contents anymore but mainly about technical problems.”

German Finance Wolfgang Schaeuble on Thursday reaffirmed his opposition to
a haircut on Greek debt held by the public sector. He argued that under national
budget rules such a haircut would forbid the government to give any new loans to
Greece or sign guarantees for loans given to the country.

“Thus, it does not make any sense to talk about a debt haircut, it is a way
to nowhere and it is not worth any discussion,” the minister insisted.

On Wednesday, Schaeuble said that eurozone finance ministers “agree that a
debt buyback program [for Greece] can be undertaken.” In order to finance this
debt buyback program, Germany favors an increase of the funds of Europe’s
temporary rescue fund, the European Financial Stability Facility (EFSF), by E10
billion, the minister said.

Some Eurozone governments would like to see the interest rate on the loans
to Greece reduced to close to zero, Schaeuble said. While Germany and some other
states want to lower the interest rate only by 90 basis points from the current
150 basis points above Euribor, other governments want to cut it to 25 basis
points above zero, he explained.

A potential deal may also allow states to choose from among different
options for Greek debt relief, Schaeuble said. Some could opt for cutting the
interest rate more deeply, while others could go the way of an EFSF increase, he

Some states might also hand over to Greece the profits they get from their
national central banks from the ECB’s previous SMP bond buying program,
Schaeuble said. The profits are estimated to total E4.2 billion, he noted.

–Berlin bureau: +49-30-22 62 05 80; email:

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–MNI Berlin Bureau; tel: +49 30-226-20580; email:

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