Brussels, 28/07/2011 (Agence Europe) - The president of the European Central Bank, Jean-Claude Trichet, considers that the second Greek rescue plan, which includes private sector participation, will not trigger any major debt episode and that financial guarantees exist in the event of a partial Greek default. In an interview to the French weekly publication, Le Point, on Thursday 28 July, he explained: “We have put forward three very clear messages. Firstly, we said that this participation should be voluntary. On this point, we found agreement. We then said that this should not necessarily lead to any kind of 'major debt episode'. With regard to everything that I said today it appears to me that we will prevent this outcome. Finally, the third message was to prevent there being any 'selective default'. Nonetheless, if this were to happen states would then have to recapitalise the banks and underpin the guarantees made by the Central Bank for its refinancing operations. We have obtained this indispensable guarantee to protect the integrity of the ECB in the event of a selective default.”
The “default” rating for Greece would remove access to cheap liquidity from the ECB for Greek banks which provide Greek bonds in exchange. The special eurozone summit plans to provide €20 billion support for Greek banks and €35 billion for these banks to continue their refinancing operations with the ECB (EUROPE 10424).
Trichet also considers that the modalities for the second rescue plan in Greece are of an exceptional nature. For instance, the 16 other eurozone countries no longer have any qualms in this respect and have “solemnly reaffirmed their firm determination to completely honour their commitments… the quality of a written commitment of a country is absolutely fundamental. Whether you are a household, company or country, you will obtain loans in good conditions if the lender has confidence”.
The president of the ECB points out that now “the problems of bad budgetary management are particularly in advanced countries, whereas previously developing countries in Asia, Latin America or the Middle East were concerned by this question”. It should be noted that Greece is now obliged to correct the, “monumental errors of past management”, which are “the emblematic illustration of this collapse”. (M.B./transl.fl)