–Reiterates Opposition to Eurobonds
FRANKFURT (MNI) – Greece will not offer exclusive bilateral deals
on collateral for its bailout loans, Germany’s Chancellor Angela Merkel
said in an interview with German Bild am Sonntag.
“It would further undermine the creditworthiness of the country
should some aid be backed by special guarantees and other [aid] not.
This path will not be pursued,” Merkel told the newspaper.
According to previous media reports, financial market experts had
warned Eurozone finance ministers not to allow special collateral deals,
since this could spark a flood of legal action from private creditors.
About E58 billion worth of Greek government bonds carry a “negative
pledge clause” that guarantees Greece will not reduce the default risk
for other creditors by offering collateral. Violating this clause could
spark another downgrade by rating agencies
Finland, however, has warned that it may not participate in the
second bailout should its demands for collateral to back its aid loans
not be met. In the worst case scenario, such a move by Helsinki could
derail the entire bailout plan, since approval by all Eurozone states is
required for it to move forward.
Merkel reiterated her opposition to the idea of Eurobonds, at least
at the present time, arguing that they would weaken pressure on national
governments to pursue austerity measures. “Under current conditions,
this cannot be the line of the [German] government,” she said.
After Germany’s President Christian Wulff described the European
Central Bank’s government bonds purchases as “legally questionable,”
Merkel would not be drawn into commenting on the interventions. “The ECB
is independent…And because of this independence, I won’t publicly
judge the work of the central bank,” she said.
Merkel also expressed confidence that the ECB would continue to
ensure price stability in the Eurozone.
–Frankfurt bureau tel.: +49-69-720142; e-mail: jtreeck@marketnews.com
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