Papaconstantinou and Roumeliotis offer opposite views on pre-bailout haircut
In interviews with Sunday's Kathimerini, Greece's ex-Finance Minister
Giorgos Papaconstantinou and its former representative at the
International Monetary Fund, Panayiotis Roumeliotis, have give
diametrically opposite views on whether the issue of restructuring Greek
debt should have been raised before Athens signed up to the EU-IMF
bailout mechanism in May 2010.
Papaconstantinou argues that there
was no such option available as Greece's eurozone partners and the
European Central Bank would not agree to a haircut on Greek government
bonds in late 2009 or early 2010, while Roumeliotis inists that the
prospects had been discussed by the IMF, which was in favor of such a
move.
“The eurozone and the ECB would never have accepted such an
option,” said Papaconstantinou. “The reason for this is not be found in
the realms of conspiracy theory, which would have the Europeans wanting
to protect their banks at the expense of Greece.
“It is that the
eurozone did not have the tools to deal with such an event, while at the
same time protecting the stability of our single currency. Also, there
is no way it would agree to the restructuring of a country's debt when
it had a primary deficit of 24 billion euros [as Greece did in 2009.”
Papaconstantinou
argues that Greece showed progress after the first few months of the
EU-IMF program, reducing its deficit by 5 percent of GDP, overhauling
its pension system, creating an independent statistics body and
obtaining greater control over spending and revenues.
The
ex-finance minister says that a meeting between Chancellor Angela Merkel
and French President Nicolas Sarkozy in Deauville in October 2010, when
they raised the issue of the private sector having to bear part of the
cost of bailing out eurozone countries, proved a turning point for the
discussion on restructuring as it investors became wary of buying bond
issued by crisis-hit countries.
Roumeliotis, however, insists that
the IMF and its then managing director, Dominique Strauss-Kahn, had
been pushing for a haircut from the start.
“I have to stress that
many members of the IMF's executive board believed from the start that
the Greek program could not be implemented without a restructuring from
the start,” he said. Roumeliotis added that Lazard, the private bank
advising the Greek government, also recommended to Athens that it seek a
writedown of its public debt.
The ex-IMF official said the issue
was raised by the IMF with the Europeans in March 2010, after the fund
completed its review of the Greek economy.
“The Europeans,
especially the ECB, did not want the eurozone's monetary stability to be
shaken by a restructuring of Greek debt. Also, foreign banks pressured
their governments to avoid a restructuring because they had a big
exposure to Greek bonds.” Foreign banks held about 75 billion euros of
Greek debt in early 2010. |
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