ECB member breaks rank and says Greek default possible
Published 19/07/2011 | 10:33
A European Central Bank (ECB) member has broken ranks and said a solution to Greece’s debt crisis could involve a "selective default" – the first time a central bank executive has gone against the ECB’s hard line on the issue.
The comments came from Ewald Nowotny, Austria's central bank governor, who warned that a full default would have grave consequences for Greece and the ECB’s ability to accept its debt as collateral for loans but a more organised default could work.
"There is ... a full range of options and definitions -- from a clear-cut default to selective default, to a credit event and so on," he told CNBC in an interview broadcast on Tuesday.
"This indeed has to be studied in a very serious way. There are some proposals that deal with a very short-lived selective default situation that would not really have major negative consequences," he added.
Mr Nowotny's stance leaves the chances of an agreement on European overall debt problems more realistic and come just hours after outgoing ECB President Jean-Claude Trichet, reiterated the ECB's monetary policy that even a selective default would be unacceptable.
The euro gained strength against the dollar on speculation that European officials could reach an agreement to halt contagion from the region’s debt crisis and signals that the ECB may now be willing to compromise on the use of Greek bonds as collateral after a default.
Greek Finance Minister Evangelos Venizelos said a resolution of the crisis is “attainable “.
The euro rose 0.6pc to $1.4202 today.
The ECB rules state that that banks put up enough collateral to receive funding at its regular refinancing operations.
European shares edged up on Tuesday, in a slight rebound after a sharp fall in the previous session yesterday but investors remained cautious.
Technology shares also gained on a an upbeat statement from IBM.