Changing the terms of investors' bonds in the eurozone makes the bloc look like a risky investment proposition, European Central Bank policymaker Juergen Stark said in a newspaper interview published on Saturday. Stark made the comments as eurozone officials review the terms of a second aid package for Greece, including the private sector involvement (PSI), because Athens is in a deeper than expected recession and market interest rates have changed.
A Franco-German crisis plan is likely to ask banks to accept bigger losses on their Greek debt than the 21 percent spelled out in a July plan for a second bailout of Athens, which now looks insufficient. Stark, who is resigning from the ECB and said he would leave the bank in 2-1/2 months, said this was wrong.
"Governments should stick to honour their obligations, just like others," he told Dutch newspaper NRC Handelsblad. "They cannot just say to investors: we will change your contracts. They have violated that fundamental principle. This makes Europe look like a very risky region to invest in." Stark's remarks echoed a broad warning the ECB reiterated on Thursday that any form of government debt writedown that forces the private sector to take losses could damage the euro and the bloc's banks.