Eurozone nations weighed in on the Greek financial crisis as the International Monetary Fund (IMF) and European Central Bank (ECB) rejected the involvement of private creditors, lest ratings agencies see their cooperation as coerced and term the measure a default.
As previously reported by AdvisorOne.com, Wolfgang Schaueble, Germany’s finance minister, had proposed in a letter to Jean-Claude Trichet, president of the ECB, that private bondholders exchange their bonds for new ones with a longer repayment schedule to allow Greece more time to recover from its debt woes.
Reuters reported late Thursday that Trichet rejected the idea at the ECB’s monthly news conference, saying, "We exclude all concepts which would not be purely voluntary, without any elements of compulsion. We call for avoiding any credit event and selective default. And of course, default." The ECB has warned that if a restructuring occurred, it would stop accepting Greek debt as collateral. Such an action would throw Greece’s banking system into disarray.
Also on Thursday, ratings agencies had said that it might be impossible for such an exchange to be carried off in a truly voluntary manner, warning that they would consider exchange under coercion a default. They had already expressed concern over the proposal earlier in the week. Moody’s Investors Service went further, saying that a Greek default could affect the ratings of bailed-out Ireland and Portugal as well.