ECB board member suggests Greek debt rollover

ROME: European Central Bank governing board member Juergen Stark suggested in an interview out Thursday that a rollover of Greek debt by private investors could be a way out of the current financial crisis.

"If this is not seen as a default or a partial default on sovereign debt, then it could indeed be a way of involving the private sector in financing Greece," he told Italian business daily Il Sole 24 Ore.

He added that if Athens doesn't take the necessary measures then it would become necessary for other parties to "interfere".

"If countries in difficulty do not introduce the necessary adjustment measures then interfering in their national policy could be a necessary way of ensuring the correct functioning of monetary union," he added.

A rollover of Greece's debt would involve persuading banks to buy new bonds from the Greek government to replace maturing securities thereby ensuring continued financing.

A similar plan, known as the Vienna Initiative, was implemented in Eastern Europe during the economic crisis to stop contagion on financial markets.

It would also be a way of satisfying growing calls for the private sector to get involved in the issue, without the need for the kind of debt restructuring which would see them take a loss on their loans.

Greece came under intense pressure Wednesday from all sides -- unions, creditors and a Moody's rating downgrade -- over the tough reforms needed to stabilise its finances in exchange for a fresh rescue package.

As the embattled Socialist government laboured to conclude an EU-IMF audit to unlock the funds to pay next month's bills, the European Central Bank gave Athens another stern warning as eurozone officials met in Vienna.

Moody's Investors Service meanwhile slashed its credit rating on debt-stricken Greece to Caa1 from B1 and warned it could be downgraded further on the possibility a painful debt restructuring will be needed.

"We are sure that a default or anything that could appear like a default has to be avoided. It would have frightening consequences for Greece banks, the Greek economy and other countries with debt difficulties," Stark said.

Copyright AFP (Agence France-Presse), 2011