Commerzbank CEO calls for Greek debt haircut: report
FRANKFURT (Reuters) - The chief executive of Commerzbank, Germany's second largest lender, called for a 30 percent haircut on Greek debt followed by a rollover into euro zone-guaranteed 30-year bonds.
In an editorial published in German daily Frankfurter Allgemeine Zeitung on Tuesday, Martin Blessing said a solution needed to include Portugal and Ireland since they are "not much better off" than Greece.
Blessing, head of the German lender which is 25 percent owned by the German government, said Italy and Spain are also in danger and nobody can foresee whether other countries will be affected.
In a piece entitled "Rendezvous with reality," Blessing called for creditors to take a 30 percent haircut on Greek bonds, and to exchange them for new 30-year securities with an interest rate of 3.5 percent and a collective guarantee on the part of the euro zone countries.
"Greece needs debt restructuring or partial debt relief," Blessing said.
"If Greece's debt were restructured, it would also be necessary to find a solution for Portugal and Ireland. Spain and Italy also threaten to succumb. No one can tell whether further countries will be affected."
German Finance Minister Wolfgang Schaeuble said that Blessing's proposal on restructuring Greek debt was interesting and would be discussed along with other suggestions.
Blessing called for private sector creditors to be included in a restructuring of Greek debt, a move that would not be "voluntary" and therefore would constitute a default.
A solution would be needed to stabilize the Greek financial sector, since this would become insolvent in the event of a default.
Furthermore, the restructuring should serve as a blueprint for Portugal and if necessary Ireland, Blessing said.
RECONSIDERING THE OPTIONS
At the end of March, Commerzbank had 900 million euros ($1.29 billion) of exposure to Portugal, less than 100 million euros exposure to Ireland, 9.4 billion to Italy, 2.9 billion to Greece, and 3 billion to Spain.
As an alternative solution, Greek bonds could be swapped for a new bond without interest payments, which would be repaid in five years' time using proceeds from the state's privatization sales, Blessing said.
The debt swap proposal would also foresee the euro zone guarantee 80 percent of the repayment, with an initial 20 percent loss to be incurred by the private sector investors, Blessing said.
Under this plan, private creditors would have to contribute more than 50 billion euros ($71 billion).
He further called on the European Central Bank (ECB) to "reconsider its flat rejection of debt restructuring."
The ECB is now in a difficult position in the markets due to the extensive purchase of government bonds. It has become a market participant, and is no longer perceived as a neutral entity, Blessing said.
Financial rescue packages are only useful when they are large enough to convince all market participants of their adequacy, and when rescuers can clearly communicate their own belief in success, Blessing said, adding that "neither was true for the European rescue parachute."
(Reporting by Edward Taylor; Editing by Greg Mahlich and Jane Merriman)
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