The European authorities acknowledged the possibility of Greek debt “restructuring” for the first time as the country’s leaders were urged to follow Ireland’s example by adopting a cross-party consensus on its bailout deal.
As EU finance ministers told Greece to accelerate its fiscal reforms, they held out the prospect of the country seeking longer loan repayment terms from its creditors in return for the delivery of ambitious measures to bring its public finances under control.
“If Greece makes all these efforts, then we must see if it is possible to make a soft restructuring of Greek debt. I am strictly opposed to a major restructuring,” euro group Jean-Claude Juncker said in Brussels.
Minister of State for Europe Lucinda Creighton today said it was“reckless” to place Ireland and Greece in the same category.
“We’re not in the situation that Greece is in. Our economy is a very strong economy, notwithstanding the problems we have with consumer spending,” the Minister said.
Progress by Greece on its programme “has been pretty slow and disappointing, unlike the case of Ireland,” she added on RTÉ this morning.
In the face of increasing scepticism on the markets, EU leaders and the European Central Bank have for many months resisted the notion that Greece might restructure any of its debt. This reflects their fear of contagion from any sovereign default in the euro zone.
However, the authorities are changing stance by seeking to develop policies to ease Greece’s debt maturities without the potentially chaotic consequences of a full-blown “hard” default.
Mr Juncker’s use of the word “soft restructuring” to give Greece breathing space is held to be significant as he previously referred only to a debt “reprofiling”.
His remarks suggest he equates the two expressions.
Such manoeuvres point towards debt repayments being stretched out for longer than agreed when the debt was issued, without reducing interest or the principal.
Minister for Finance Michael Noonan told reporters he was not seeking a reprofiling of Ireland’s debt, adding that his sole objective in current talks was to reduce the interest rate on Ireland’s loans.
EU economics commissioner Olli Rehn called on Greek politicians to set aside their differences, saying matters of “national destiny” and “fundamental national responsibility” were at stake.
“If it is possible for Portugal and Ireland, how come not in Greece?” Mr Rehn asked.
Mr Juncker’s comment on restructuring marked a clear softening of tone but influential ministers are divided over the merits of such a departure. French economy minister Christine Lagarde said any restructuring was “off the table”, adding that such manoeuvres would constitute a default. German chancellor Angela Merkel ruled out debt restructuring in unambiguous terms on Monday.
In Brussels yesterday, however, Germany’s deputy finance minister Jörg Asmussen opened up the possibility of “reprofiling” as a last resort. He pointed to talks about “measures that don’t only burden the taxpayer but also involve the private sector on a voluntary basis” if a new Greek bid to meet bailout targets failed.
Mr Noonan said it was not the case that his fellow ministers were angry at the failure of Greece to meet its targets, but said such gatherings were very understated.
“They’re non-emotional zones, you know, so there wasn’t anything like that,” he said. “The position in Greece as you know is difficult for Greece and difficult for Europe as well.”
