Bundesbank Says Bondholders Must Be Part of Rescue Mechanism

Germany’s Bundesbank said a permanent European state-rescue mechanism must ensure that private holders of sovereign debt share the cost of any restructuring.

“A transparent procedure that guarantees an extensive and credible consolidation and reform program could, along with improved financial-market regulation, considerably reduce the risk of a systemic crisis,” the Frankfurt-based central bank said in its monthly report today. “In this context, private creditors also have an indispensable responsibility when it comes to restoring sustainable public finances in over-indebted nations.”