Europe has not exhausted ways of helping Greece but any restructuring its debt would pose serious risks, German Finance Minister Wolfgang Schaeuble said on Thursday in an interview.
"It is true that in the European Union (EU) we have not yet explored all the scenarios to help Greece," Schaeuble told the German business daily Handelsblatt.
He acknowledged that "budget discipline measures by themselves cannot resolve the problems" faced by Athens as it struggles with about 340 billion euros ($480 billion) in debt.
An aid programme worth 110 billion euros set up by the EU, the International Monetary Fund and the European Central Bank has forced Greece to adopt austerity measures that economists say will curb short-term economic growth.
"There must be medium and long-term growth prospects," the German finance minister said, including investments in solar energy and electric power networks.
But Schaeuble warned that changing the terms of Greek debt repayments, a scenario being considered by many EU leaders, could cause financial turmoil in Greece and elsewhere.
"A restructuring scenario would contain serious risks," and undermine confidence in public finances in the eurozone, he said.
Investors might rush to get funds out of Greece and push the banking sector and government towards collapse, generating a ripple affect that could reach other eurozone members.
A Greek bankruptcy could have "more dramatic consequences than the collapse of Lehman Brothers," Schaeuble said.
He referred to the US investment bank that went under in September 2008, sparking a new phase in the global economic crisis.
"There exists no precedent of a country that was forced to default on its payments within a monetary union," the German minister added.
He has recently suggested that Greece's debt could be subjected to a so-called "soft" restructuring, a notion that might involve an extension of the reimbursement period or a lowering of interest rates applied to it.
Financial markets nonetheless expect a "hard" restructuring at some point under which some of the money Greece has borrowed would not be paid back.
Even the former option would require the consent of the ECB however, because it currently owns some 45 billion euros in Greek debt and has lent money to Greek banks against much more in Greek-based collateral.
The ECB is steadfastly opposed to any restructuring of Greece's debt.
Schaeuble took care to underscore the ECB's position, after comments by both sides in the past week have lead to media reports that highlight the danger of a clash to investor confidence in the 17-nation eurozone.
"We have always been well-inspired to respect the independence" of the central bank, Schaeuble stressed.
AFP
