BERLIN (Reuters) - Cutting Greece’s debt will not solve the country’s problems, ECB policymaker Jens Weidmann was quoted as saying on Sunday, adding Athens needed to raise its productivity instead.
“Greece consumes considerably more than it produces, the public budget shows high deficits,” Weidmann, head of Germany’s Bundesbank and who sits on the European Central Bank’s Governing Council, was quoted as saying.
“As long as that doesn’t change, a hair cut will not really improve anything,” he said, Bild am Sonntag newspaper reported.
Euro zone policymakers are exploring ways to extend a rescue deal for overborrowed Greece and give it more time to repair its public finances. At the same time, authorities are trying to prevent the debt crisis from escalating in the bloc’s periphery.
On Saturday, German magazine Der Spiegel reported — citing unnamed German finance ministry sources — Greece could cut its public debt by 20 billion euros ($28.2 billion) if it bought back sovereign bonds at market prices as part of a rescue.
The finance ministry declined to comment.
Wolfgang Franz, head of Germany’s “wise men” economic advisers, told Focus magazine on the weekend a hair cut was “inevitable and justified.”
“One possibility would be that the current EFSF euro rescue mechanism swaps — at a significant discount — Greek bonds into bonds it issues and guarantees,” Franz was quoted as saying.
The ECB has signaled it remains fiercely opposed to any form of default. The bank is fearful the problems that have hurt Greece, Ireland and Portugal could spread to other indebted euro zone members if a default were triggered.
Weidmann also said he opposed common euro zone bonds.
“The result would be that European, especially German, taxpayers must cover Greece’s state debt. That would be a step into the transfer union that Germany has rightly rejected so far,” he said.
($1 = 0.708 Euros)
Reporting by Annika Breidthardt; Editing by David Hulmes