Euro zone ministers pressed ahead on Tuesday with plans to make Greece's private creditors share the costs of a second aid package amid ECB warnings that any coercive solutions could unleash a new wave of contagion.
Finnish Finance Minister Jyrki Katainen said at the start of a meeting with his single currency counterparts in Brussels that some form of private sector involvement was important.
But he echoed the views of his Austrian and Belgian colleagues in stressing that euro zone governments must take care not to unsettle financial markets, already unnerved by the prospect of Greece defaulting on its massive debt pile.
"Most of the countries have indicated that some form of private sector involvement is crucial," Katainen said. "I want to underline that we have to avoid, whatever it takes, the next financial crisis. The balance is very difficult."
Ahead of a summit of EU leaders on June 23-24 at which a new aid package for Greece is expected to be finalised, Germany is pushing its partners to agree to a bond swap that would push out the maturities on Greece's debt by seven years, giving it more time to right its economy and sell off state assets.
Rating agencies have warned they would see such a step as coercive and akin to a default.
The European Central Bank also opposes Berlin's plan and is pressing the bloc to opt for a softer solution that would seek contributions from the banks, pension funds and insurance firms that hold Greek debt on a "purely voluntary" basis.
"Somebody has to concede ground over the coming days or the region will experience a full-blown financial crisis," said David Mackie, an economist at J.P. Morgan.
Reuters
