CORDOBA, Spain (Dow Jones)--A possible restructuring of Greece΄s sovereign debt would have a worse systemic effect on global markets than the 2008 Lehman Brothers bankruptcy, European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo said Tuesday.
"Any debt restructuring would imply the breach of legal obligations, which most likely would have a more negative systemic effect than the Lehman catastrophe," Paramo added.
Speaking at an academic event in Cordoba, Spain, Paramo said the ECB doesn΄t contemplate such a restructuring as a "central scenario" and added that Greece΄s government has "viable" plans to cut its sizeable budget deficit.
"The Greek government is implementing reforms," he said. "It makes no sense to have this debate."
Paramo also said that no debt restructuring has occurred in a developed European economy since World War II, and any such event would have an impact on the European banking sector as a whole.
Last year, Athens was forced to appeal to its European Union peers and the International Monetary Fund for a bailout loan of EUR110 billion in return for an overhaul of its economy.
However, the country΄s economy and government finances remain mired in a deep crisis. Meanwhile, some economists say that the government may be forced to restructure debt, despite a recent repayment extension for Greece΄s EU and IMF loan.
SOURCE: CAPITAL
