28th Oct 2016

Germany fears 'full-blown bankruptcy' in eurozone

  • Germany's Schaeuble has been a key figure in devising the eurozone rescue so far (Photo:

German finance minister Wolfgang Schaeuble believes Greek bankruptcy is imminent, according to a leaked letter, and argues that restructuring of the country's debt is necessary.

"We are standing before the real risk of the first full-blown bankruptcy inside the eurozone," Schaeuble said in a letter addressed to European Central Bank president Jean-Claude Trichet and leaked to the German press.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

In the starkest language yet by a European official, the German minister called for additional aid to be made available to Greece, adding that private banks should participate in the cost of the Greek rescue.

EU officials and member states are understood to be currently working on a second bail-out agreement for Greece, in addition to the €110 billion pledged last year, with estimates suggesting the new aid package could total €60 billion.

Finance ministers are expected to reach an agreement on 20 June, just three days before a summit of European leaders, with Schaeuble suggesting that private creditors should be made to wait an extra seven years before repayment of their existing Greek loans.

"Any agreement on 20 June has to include a clear mandate - given to Greece possibly together with the IMF - to initiate the process of involving holders of Greek bonds. This process has to lead to a quantified and substantial contribution of bondholders to the support effort, beyond a pure Vienna initiative approach," reads the letter.

"Such a result can best be reached through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years, at the same time giving Greece the necessary time to fully implement the necessary reforms and regain market confidence."

The ECB is strongly opposed to a restructuring of Greek debt however, partially because the bank has bought large quantities of Greek bonds over the past year in order to stabilise markets.

ECB executive board member Lorenzo Bini Smaghi on Monday said Greece had marketable assets worth €300 billion, roughly equal to the country's debts, and was therefore not bankrupt.

"Greece should be considered solvent and should be asked to service its debts," he told journalists. "Restructuring should only be the last resort ... when it is clear that the debtor country cannot repay its debts."

The battle between Germany and the ECB is likely to play out in the coming days, with the current leadership uncertainty at the IMF also a complicating factor however.

In his letter, Schaeuble called on the international lender to maintain its support for Greece.

At the same time, unease is growing within Angela Merkel's Christian Democratic Union over further aid to Greece.

The German Chancellor is on Wednesday set to defend her plans in front of increasingly mutinous MPs, who feel they are being bounced into backing a further Greek bail-out.

The confrontation comes a day after Merkel met US president Barack Obama in the White House, with the American leader warning that the European debt crisis cannot be allowed to threaten the global economy.

Stakeholders' Highlights

  1. ANCI LazioAnci Lazio Definetely has a lot to Celebrate This Year
  2. EU-China ForumDebating the Future of the EU-China Relations on 28 November in Prague
  3. COMECEMigrants: From Fear to Compassion
  4. Birdlife EuropeBusiness as Usual - Juncker Snubs Environment and Protects Broken CAP
  5. EFADraft Bill for a 2nd Scottish Independence Referendum
  6. UNICEFCalls on European Council to Address Plight of Refugee and Migrant Children
  7. ECTAJoin us on 9-10 November in Brussels and Discover the new EU Digital Landscape
  8. Access NowCan you Hear me now? Verizon’s Opportunity to Stand for Global Users
  9. Belgrade Security ForumMeaningful Dialogue Missing Not Only in the Balkans, but Throughout Europe
  10. EuropecheEU Fishing Sector Celebrates Sustainably Sourced Seafood in EU Parliament
  11. World VisionWomen and Girls Urge EU Leadership to Help end Gender-based Violence
  12. Belgrade Security ForumGet the Latest News and Updates on the Belgrade Security Forum @BelSecForum

Latest News

  1. Greece to probe UN allegations of illegal returns
  2. Poland defies EU on rule of law
  3. Belgium breaks Ceta deadlock
  4. Left MEPs thwarting Dieselgate probe, say right MEPs
  5. Cars should be allowed to exceed emissions limits, say experts
  6. EU case against Google is bad for developers
  7. Privacy activists mount court challenge to EU-US data pact
  8. Thousands of Nato soldiers go to Baltic states, Romania