German call for private creditors to be part of any future rescue
Published 02/10/2010 | 05:00
PRIVATE creditors -- such as bank bondholders -- will have to be involved in any financial crisis rescue in the future, a senior German politician said in Dublin yesterday.
Any new "resolution" scheme would have to set clear parameters for a private-sector involvement, Dr Bernd Pfaffenbach, state secretary at the German Ministry for Economics and Technology told a meeting at the Institute of International and European Affairs.
"A clear procedure for a debt restructuring would enhance risk awareness on markets. It would also strengthen budgetary discipline," he said.
Dr Pfaffenbach warned that EU Commission proposals for legislation on a strengthened fiscal and economic surveillance in Europe "may not go far enough in some respects".
Germany supports a stability that has "sharper teeth and allows earlier action", even if this requires changes to EU treaties.
"The issue of sanctions has been discussed thoroughly. (The idea of) using structural funds in order to exert financial pressure seems to have gained ground.
"Whether sanctions can be applied in an automatic manner and no longer be dependent on a majority in the European Council, is still an open question," he said.
Europe must adapt to an environment, where easy credit will no longer be the main driver of growth.
"In some cases, regaining a sustainable growth path may not be possible without a retrenchment in living standards," Dr Pfaffenbach added.