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Germany's new stance: Greek bondholders must share burden, and we want collateral for new loans

Wolfgang Schäuble says Greece’s bondholders will have to suffer the pain – what chance of the same tactic for Ireland?

Wolfgang Schäuble has acknowledged that Greece needs help - but wants its bondholders to chip in with the rescue effort.
Wolfgang Schäuble has acknowledged that Greece needs help - but wants its bondholders to chip in with the rescue effort.
Image: Geert Vanden Wijngaert/AP

GERMANY HAS WARNED warned that Greece’s private bondholders will have to shoulder some of the burden if the country is to be offered a second bailout deal in a last-gap attempt to prevent a default.

In a letter to the European Central Bank and the other finance ministers of the Eurozone, dated Monday and seen by the Guardian, German finance minister Wolfgang Schäuble acknowledged the urgent need for Greece to be given a new package of funds.

But, Schäuble added, assistance would need to come from a variety of sources, with lenders of last resort being expected to carry the entire can for a second Greek rescue – and a “quantified and substantial contribution of bondholders” would be required.

The Guardian said the letter also contained a “detailed blueprint” drawn up by Germany to penalise creditors who refused to allow Greece to ‘roll over’ – essentially to defer – repayment of their bonds.

Details of the letter came as Ireland’s finance minister Michael Noonan told Bloomberg that the AAA-rated countries within the Eurozone – apparently Germany and France – were now seeking ‘liens’ on the assets of countries they were bailing out.

This means that the larger countries are essentially looking for the poorer ones to offer collateral – most likely in the form of a claim to seize some state assets – in exchange for their cooperation in bailing out the poorer countries.

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About the author:

Gavan Reilly

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