EFSF Should Purchase Greek Debt to Contain Crisis, Weinberg Says
Euro-area leaders should use the European Financial Stability Facility to buy Greek sovereign debt to prevent the crisis from infecting the banking system, according to Carl Weinberg of High Frequency Economics.
“The situation would be contained, the losses will be contained, and we won’t run the risk of some uncontrollable event that gets propagated through credit-default swaps,” said Weinberg, founder of High Frequency in Valhalla, New York, in an interview with Kathleen Hays on “The Hays Advantage” on Bloomberg Radio.
The EFSF is overseen by euro-area nations and is designed to support Europe’s monetary union. European Central Bank chiefs have committed to ensure any Greek debt restructuring won’t be deemed a credit event enabling buyers of credit-default swap insurance contracts to seek compensation from swaps sellers.
Germany is reviving proposals for a swap involving a voluntary exchange of debt against bonds with a longer maturity. Greek banks are willing to roll over their government bonds as part of a European Union rescue, Finance Minister Evangelos Venizelos told Bloomberg Television yesterday.
“Greece will restructure, there’s no doubt about that,” Weinberg said. “The idea is to establish a buyer of last resort.”
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