“The losses in many areas would be too high and could provoke a contagion impact,” Ackermann said in an interview on the sidelines of a conference in St. Gallen, Switzerland, today. “They have to increase the package for the next two years in order to cope with these challenges, there is no other solution.”
European Central Bank officials have intensified their opposition to a restructuring or default and European finance chiefs held an unscheduled meeting in Luxembourg on May 6 and said Greece needs “a further adjustment program” on top of its existing 110 billion-euro ($156 billion) rescue package. European banks have $130 billion in exposure to the southern European country, according to Credit Suisse Group AG strategist Andrew Garthwaite.
Deutsche Bank, Germany’s biggest lender, had net sovereign risks tied to Greece of 1.6 billion euros at the end of last year, it said in March. German banks’ claims against Greek borrowers fell to $34 billion in the final quarter of 2010 from more than $40 billion, Bank for International Settlements statistics show.
Greek government bonds fell, pushing the two-year note yield to a record, on persistent speculation that the country will have to restructure its debt. German June Bund futures rose to the highest since January.
Ackermann’s comments echoed warnings by the EU that a restructuring of Greece’s sovereign debt would have “devastating implications” for the country and the euro area as a whole.
“A debt restructuring in Greece would have major consequences on the soundness of the banking sector in Greece as well as on any banks having exposure to Greek securities,” EU Economic and Monetary Affairs Commissioner Olli Rehn said earlier this week at the European Parliament in Strasbourg, France. “Such a major banking crisis would lead to a massive credit crunch,” Rehn said, adding that “the contraction of the economy would be unprecedented in Greece.”
German Finance Minister Wolfgang Schaeuble said in a speech to the lower house in Berlin today that Greece will have to carry out more savings before more international aid is freed up, tightening the screws on the Greek government as it faces down budget-cut protests.
No Euro Exit
Greece’s debt “will not be restructured,” Ackermann said today. “It would be a huge mistake to restructure it now.”
The country should be given time to “do what they need to do,” Ackermann said. “And we can talk about it in three year’s time.”
It is unlikely Greece would leave the euro and “on balance Greece would choose to avoid early debt restructuring,” Credit Suisse analysts led by Garthwaite said in a note today.
Deutsche Bank Supervisory Board Chairman Clemens Boersig said on May 10 that a Greek exit from the euro and EU is not in the interest of Germany or Europe and a restructuring of its debt would have “severe consequences.”
To contact the reporter on this story: Elena Logutenkova in Zurich at firstname.lastname@example.org