Business World

Saturday 24 March 2018

Debt default 'must be an option for eurozone members'

Euro area must prepare for insolvency, Germans advised

Brendan Keenan

Brendan Keenan

EUROZONE countries and banks should be allowed to default, the economic institutes that advise the German government have said.

Berlin has selected eight organisations, including the well-known Ifo and ZEW institutes to provide twice-yearly, joint assessments of the economic outlook.

As well as making their forecasts, the institutes said the EU 'bailout' rescue fund for euro area members should not be extended beyond 2013.

They also opposed the idea of 'pooled' bond sales, whereby money borrowed by more creditworthy states like Germany could be transferred to peripheral euro-region governments facing funding difficulties, like Ireland's.

Instead, the eurozone should introduce insolvency rules for states and banks that would allow for orderly defaults and debt renegotiations.

Figures yesterday confirmed that Irish banks were the only ones among the stressed euro states to increase their borrowings from the European Central Bank last month.

The Bank of Greece said that Greek institutions had taken less from the ECB for a second month, borrowing €94.3bn for their refinancing operations.

Spanish banks' ECB borrowings fell 11pc to €97.7bn, the Bank of Spain said, while Portugal's central bank said on Monday that its banks' ECB financing fell 19pc.

Irish Central Bank figures showed borrowings from the ECB rose 25pc last month to €119bn, as Irish banks found it difficult to borrow on the markets and hold deposits.

The Portuguese government yesterday presented its budget austerity plan to opposition parties, amid fears that failure to agree could trigger an election. One Portuguese newspaper said this could leave the country a euro-area outcast.


The biggest opposition party in the Lisbon parliament, the Social Democrats, said they will only announce their position on the 2011 budget after they have studies the document given to them yesterday by the finance minister.

Greek riot police used tear gas to disperse dozens of culture ministry employees who blocked access to the Acropolis temples to protest against job losses under the government's austerity programme.

Police led several protesters away in handcuffs after they broke into the monument through a side entrance.

(Additional reporting Bloomberg)

Irish Independent

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