Germany Says Private Creditors Must Help With Greek Bailout

Posted June 10th, 2011 at 9:35 am (UTC-5)
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German Finance Minister Wolfgang Schaeuble told parliament Friday that private investors will have to help with a new financial aid package for Greece.

Schaeuble said European finance ministers are setting up a working group to find a “good solution” for the involvement of the private sector that the European Central Bank can support. He said the ECB, International Monetary Fund and the European Commission would be part of the working group.

Schaeuble argues that bondholders must share in the burden of a second bailout for Greece, and has proposed they extend the maturities of their debt by seven years to give Greece more time to address its economic problems.

Private investors have been reluctant to accept such losses or restructure the debts. The European Central Bank said Thursday that it opposes the idea of private sector participation that is not “purely voluntary.”

Officials have said a new rescue package for Greece could amount to $130 billion. Greece has already staved off economic collapse once, rescued by last year’s $158 billion bailout loan from the European Union and International Monetary Fund.

Economic reports show the Greek economy is stalling despite cost-cutting measures and other reforms.

Opponents to additional government spending cuts have been holding daily protests across Greece, and there are calls for a general strike next week on June 15.

The Greek government is also facing pressure from outside. EU and IMF experts have been reviewing Greek progress on debt-cutting before approving the next planned $17 billion payment of the bailout package.