Germany Puts Greek Debt Restructuring on Table

In a letter to European Union (EU) nations, German Finance Minister Wolfgang Schaeuble urged countries to make private bondholders contribute to Greece's impending debt relief arrangement.

The letter, dated June 6, was reported by Reuters to say that supporting Greece demanded that bondholders make a "quantified and substantial" contribution. Addressed to the heads of the International Monetary Fund (IMF) and European Central Bank (ECB) as well as EU country heads, the letter said in part, "Such a result can best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence."

Schaeuble specifically urged recipients to take stronger steps than the so-called Vienna Initiative that had earlier been proposed. If his advice is followed, it would amount to a restructuring, even if voluntary, of privately held Greek debt; as previously reported by AdvisorOne.com, ratings agencies have said that they would treat it as a default, which would impact Greece's credit rating.