Germany has put a Greek restructuring back on the table, demanding in a letter to its EU partners that private bond holders make a major contribution to a looming debt relief deal for the struggling euro zone member.
The letter by German Finance Minister Wolfgang Schaeuble explicitly urges the bloc to go beyond the softer "Vienna Initiative" approach to private sector involvement that euro zone governments have been mulling ahead of a crucial summit later this month.
Dated June 6 and addressed to the heads of the European Central Bank, International Monetary Fund and Schaeuble's euro area counterparts, it demands a "quantified and substantial" contribution from bondholders to Greek support efforts.
"Such a result can best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence," the letter, a copy of which was obtained by Reuters, reads.
Such a swap would amount to a restructuring of Greece's privately held debt, even if it was done on a voluntary basis, and ratings agencies have warned that they would classify it as a default.
The ECB, after rejecting all talk of restructuring for months, has over the past week backed the idea of a voluntary rollover of Greece's privately held debt.
It is unclear whether the central bank could accept the solution advocated by Schaeuble, which stops short of an outright "haircut" -- a term used to describe a forced reduction in the value of a bond's principal -- but goes beyond some of the softer rollover solutions the bloc has been discussing.
The cost of ensuring Greek debt against default rose on Wednesday as investors fretted about the possibility of a restructuring.
Reuters
