VIENNA (dpa-AFX) - European Central Bank Governing Council member Athanasios Orphanides urged European leaders to reverse the policy of haircut on Greek debt in order to restore investor confidence.
'Reversing the Greek PSI -Private sector involvement- decision would help to restore trust,' Orphanides, who also heads the central bank of Cyprus, wrote in the Financial Times.
Abandoning the Greek PSI decision would also raise the financing cost on the Greek government, but by restoring trust in the Eurozone it would reduce the financing cost of other Eurozone governments, he opined. 'Reversing the Greek PSI would benefit the Eurozone as a whole.'
The doctrine of PSI reinforced the idea that holders of Eurozone sovereigns should be prepared to incur losses even under circumstances that would not necessarily trigger comparable losses for sovereigns outside the currency bloc, the policymaker said.
Europe failed to regain investor trust despite reversing the Deauville PSI innovation, as the December summit did not reverse the haircut on Greek debt. Rather, the Eurozone leaders supported continuing the Greek PSI while stating that the Greek case was unique and would not be repeated, he said.
Copyright RTT News/dpa-AFX