Maturities on Greek debt could be extended on a voluntary basis as long as this does not create a credit event, the EU's top economic official said on Monday, referring to the bloc's efforts to limit market repercussions.
It is still important for Greece to step up fiscal consolidation and implement its privatisation programme, EU Economic and Monetary Affairs Commissioner Olli Rehn said.
"While debt restructuring is not on the table, a Vienna-type initiative that aims at retaining the exposure of private investors, banks and other financial institutions to Greece could also be pursued," he told a news conference.
"In this context of the Vienna-type initiative we have said that a voluntary extension of loan maturities, so-called reprofiling or rescheduling on a voluntary basis, could also be examined on the condition that it would not create a credit event."
A credit event would trigger insurance payouts on sovereign debt and downgrades by credit-rating agencies.
Rehn has referred before to the Vienna Initiative as a model for debt rollover. The initiative was an agreement at the height of the global financial crisis between the European Central Bank, the European Bank for Reconstruction and Development, regulators and banks with units in central and eastern Europe.
Under it, parent bank groups committed to maintain their exposures and recapitalise their subsidiaries in the region as part of financial aid packages from the EU and the IMF.
Sources told Reuters last week that euro zone governments are considering a plan to prevent a Greek default under which private investors would be asked to maintain their exposure to its debt and Athens would get a new aid package.
Rehn made clear that any further measures for Greece would depend on its getting its finances in order.
"Greece will have to now step up the gear concerning its fiscal consolidation this year and concerning the implementation of its privatisation programme," he said.
Greek sovereign debt is forecast to rise to nearly 350 billion euros by the end of 2011, or 154 percent of its gross domestic product, one of the highest levels in the world.
Many economists say restructuring is inevitable, but European governments have promised not to force losses on creditors before mid-2013.
Rehn said he expected that euro zone countries would have the determination to help Greece when the next tranche of aid is due despite public opposition in some countries.
Asked whether Italy could be at risk of falling into the same category as Greece, Ireland and Portugal, and being forced to seek aid, Rehn suggested this was unlikely.
Standard & Poor's on Saturday cut its outlook on Italy's A+ rating to negative from stable.
"Concerning Italy we are seeing relatively solid growth and we are seeing a determination to reduce the fiscal deficit," Rehn said, adding that while Italy had some structural reform challenges, its fiscal reforms were on track.
He also said that Spain had managed to decouple from the other problem countries in the euro zone and needed to continue its "bold" measures for fiscal consolidation.
REUTERS
