FRANKFURT, March 23 (Reuters) - Greece's sovereign debt will have to be restructured as soon as other euro zone countries are out of danger, former European Central Bank chief economist Otmar Issing told Germany's Der Spiegel magazine.
In an interview published on Wednesday, Issing said it was important that other euro zone countries had helped out Greece during its acute crisis to prevent Athens' troubles from spreading to other countries.
'But as soon as the other countries are out of danger, the Greek government debt will have to be restructured,' he said.
'This can be done by cutting that debt or by extending the terms of the loans, but there is no getting around a debt restructuring, no matter how you calculate it,' he added.
The publication of Issing's comments came as Greek Prime Minister George Papandreou was quoted as saying restructuring his country's debt would probably cause the collapse of Greek banks and could also threaten those in Germany.
Asked if banks and insurance companies could cope with a Greek sovereign restructure, Issing replied: 'Lengthening loan periods would be more palatable than a haircut. It will not force the banks to write off their claims. They'll get their money back; it'll just take longer.'
Issing said he did not think Spain would need to tap Europe's rescue fund.
'The country is finally on the road to reform. For example, it is cleaning up rigidity in the labour market stemming from the days of the Franco dictatorship,' he said. 'Portugal still stands a chance of making do without assistance.'
(Writing by Paul Carrel; Editing by Ruth Pitchford) Keywords: EUROZONE GREECE/ISSING (paul.carrel@thomsonreuters.com; +49 30 2888 5214; Reuters Messaging: paul.carrel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
In an interview published on Wednesday, Issing said it was important that other euro zone countries had helped out Greece during its acute crisis to prevent Athens' troubles from spreading to other countries.
'But as soon as the other countries are out of danger, the Greek government debt will have to be restructured,' he said.
'This can be done by cutting that debt or by extending the terms of the loans, but there is no getting around a debt restructuring, no matter how you calculate it,' he added.
The publication of Issing's comments came as Greek Prime Minister George Papandreou was quoted as saying restructuring his country's debt would probably cause the collapse of Greek banks and could also threaten those in Germany.
Asked if banks and insurance companies could cope with a Greek sovereign restructure, Issing replied: 'Lengthening loan periods would be more palatable than a haircut. It will not force the banks to write off their claims. They'll get their money back; it'll just take longer.'
Issing said he did not think Spain would need to tap Europe's rescue fund.
'The country is finally on the road to reform. For example, it is cleaning up rigidity in the labour market stemming from the days of the Franco dictatorship,' he said. 'Portugal still stands a chance of making do without assistance.'
(Writing by Paul Carrel; Editing by Ruth Pitchford) Keywords: EUROZONE GREECE/ISSING (paul.carrel@thomsonreuters.com; +49 30 2888 5214; Reuters Messaging: paul.carrel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
© 2011 AFX News
