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Open Europe comment: It’s time for the ECB and the eurozone to accept losses in Greece

08 Feb 2012

In City AM, Open Europe’s Raoul Ruparel argues, “whatever the outcome of the talks between the Greek government and its creditors, let’s not forget the bigger picture – ultimately, the current approach to Greece’s enormous economic problems is failing. Another bailout along with a ‘voluntary’ Greek restructuring cannot be put together in a way that makes it politically acceptable and/or economically viable – it simply will not return Greece to solvency…This begs the question, should the official sector accept losses this time around, to avoid potentially greater and more painful losses in a Greek default down the road? On one level, this would be the most sensible option – by far.”
 
Raoul calls for the ECB to transfer its holdings of Greek debt to the EFSF, the eurozone bailout fund, at cost price allowing them to be submitted to the ‘voluntary’ restructuring without the ECB directly taking losses. Raoul concludes, “Admittedly, setting a precedent of official sector losses would raise huge questions over whether Portugal and Ireland will request similar treatment. However there are now no easy options. The current course of a second Greek bailout could just as easily have knock-on effects in the form of a second round of taxpayer-backed rescues. We have always argued strongly against taxpayers taking losses but, unfortunately, this is one of the few plausible options we’re now left with.”
City AM: Ruparel

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