WASHINGTON: Europe's banks could absorb a Greek bond default without much trouble, but contagion from such an event could be a more serious problem, the International Monetary Fund's Europe chief said Friday.
"European banks would not have that much trouble, contrary to what people sometimes think, absorbing any losses related to Greece," said Antonio Borges, director of the Fund's European Department.
"Of course it would be costly, of course it would damage their profitability, but it would not be a dramatic blow, by any stretch of the imagination."
Speaking during the IMF-World Bank annual meeting, Borges stressed that it was only a theoretical issue, and that in terms of dealing with challenges in Europe, "we're beyond that really."
"The problem today is that we are beyond Greece, and the real question about the problems in Greece is, what will happen in the rest of Europe, and if the problem mushrooms. And that's why the markets are nervous."
He stressed the need to help Greece and the rest of Europe shore up their finances and banks "to make sure that there is no contagion."
Europe's banks generally, and French banks in particular, have seen interbank funding lines tightened and their shares sold off by investors worried about their holdings of sovereign debt from Greece and the eurozone's other financially embattled governments.
Under a July 21 plan, private holders of Greek debt have tentatively agreed to a 21 per cent "haircut" on what Greece has to pay them to service the debt, for roughly 50 billion euros ($67 billion) in savings for Athens.
On Friday Dow Jones reported that senior Greek officials said that some of the country's creditors think the size of the haircut needs to be doubled to allow Athens to close its fiscal deficit.
But the officials said Greece will try to stick to the existing plan.
"European banks would not have that much trouble, contrary to what people sometimes think, absorbing any losses related to Greece," said Antonio Borges, director of the Fund's European Department.
"Of course it would be costly, of course it would damage their profitability, but it would not be a dramatic blow, by any stretch of the imagination."
Speaking during the IMF-World Bank annual meeting, Borges stressed that it was only a theoretical issue, and that in terms of dealing with challenges in Europe, "we're beyond that really."
"The problem today is that we are beyond Greece, and the real question about the problems in Greece is, what will happen in the rest of Europe, and if the problem mushrooms. And that's why the markets are nervous."
He stressed the need to help Greece and the rest of Europe shore up their finances and banks "to make sure that there is no contagion."
Europe's banks generally, and French banks in particular, have seen interbank funding lines tightened and their shares sold off by investors worried about their holdings of sovereign debt from Greece and the eurozone's other financially embattled governments.
Under a July 21 plan, private holders of Greek debt have tentatively agreed to a 21 per cent "haircut" on what Greece has to pay them to service the debt, for roughly 50 billion euros ($67 billion) in savings for Athens.
On Friday Dow Jones reported that senior Greek officials said that some of the country's creditors think the size of the haircut needs to be doubled to allow Athens to close its fiscal deficit.
But the officials said Greece will try to stick to the existing plan.
No comments:
Post a Comment