Mystique Bikini Shaope

Brazilian central bank debt restructuring divides Greek euro zone

By Marcus Walker

BERLIN-The divisions over the handling of the sweltering Greek debt problem are deepening in the euro area. German officials have been receptive to a voluntary restructuring in the Greek bond payments, but most of the block authorities fear the repercussions of such a step.

The European position has been that Greece will cut your expenses and pay all your debts. But investors and privately, some European governments doubt that that country to do so. In that case, Greece will need more help and, in the opinion of many, will have to restructure its debt.

The debate in the euro area revolves around whether and when to restructure. German officials believe that Greece should be encouraged to sit with the holders of its bonds this year to discuss a deferral of the maturity of its bonds, a step known as debt restructuring, sources informed. A restructuring would reduce the financing needs of Greece in the coming years and would save investors a cut the amount due. "We are cautiously open to voluntary measures to avoid having to impose cuts," said a German official who added that "However, our ideas are not being well received in Europe."

Other key players such as France, the European Central Bank and the European Commission to discuss oppose even a benign form of Greek debt restructuring, arguing that the markets would conclude that other crisis-hit countries such as Ireland and Portugal Nor will pay its obligations.

Greece is open to the idea of \u200b\u200bdialogue with its creditors for a rescheduling, but the country first needs approval policy other euro area, its main financial support, Greek officials say.

The debate could become more urgent in the coming weeks, when a team of European Union (EU) and the International Monetary Fund (IMF), which arrived in Athens on Tuesday, May 3, present a progress report on the fiscal and debt sustainability.

Greece has failed to restore investor confidence in sovereign debt since receiving a ransom of 110,000 million euros (U.S. $ 162,900 million) in the euro zone and the IMF in May 2010. Bonds to two years of the Greek government currently has a yield of about 24.5%, a clear signal that investors do not believe that the bonds will be paid in full.

rescue plan stipulates that Greece will return to the bond market in 2012 to cover its funding needs for 30,000 million euros (U.S. $ 44,440 million). But few European officials believe that Greece can go to market next year. Therefore, Greece would need additional funds in the euro zone and the IMF is facing a complicated or default.

A new multi-million dollar credit to Greece is not a popular idea in Germany, where resistance to the bailout legislation is growing. If Greece can only borrow in the euro area, over time their debt will consist increasingly of emergency loans and less in bonds held by private investors.

"Taxpayers end up buying things that the private sector," said Thomas Mayer, chief economist at Deutsche Bank in Frankfurt. Finally, when Greece seek debt relief, the cost will fall on taxpayers, he predicted.

If nothing changes and Greece need another bailout, taxpayers in the euro zone will end up having around 142,000 million euros of Greek government debt in late 2013, according to calculations by David Mackie, economist at JP Morgan in London.

Source: WSJ