Greek default must be avoided, says ECB chief

By Agence France-Presse
Tuesday, July 19, 2011 7:31 EDT
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The responsibility to prevent Greece from defaulting lies with eurozone governments, European Central Bank chief Jean-Claude Trichet told a Slovak newspaper in an interview published on Tuesday.

“A credit event, selective default or default must be avoided,” Trichet told the daily Hospodarske Noviny, repeating the central bank’s line two days before a eurozone summit on Thursday.

“We ask the eurozone governments to find appropriate solutions as soon as possible,” he added.

The ECB chief dismissed calls for a Greek default as a way out of the crisis.

Richard Sulik, head of a junior party in Slovakia’s coalition government and speaker of parliament, has been among those arguing that a default would help settle the Greek debt problem.

“Who could consider a default of any sovereign country, in the context of a European and global crisis of public finances, a good solution?” Trichet said.

Slovakia, which adopted the euro in 2009, was the only member of the currency bloc to refuse an emergency loan to Greece last year.

Its centre-right coalition, in power since July 2010, has suggested it might refuse to support a new loan as well.

Greece will be able to pay its bills this month after the eurozone cleared the way for the next 12-billion-euro tranche of last year’s 110-billion-euro ($160 billion) European Union and International Monetary Fund bailout.

But the eurozone’s finance ministers need to work on a second rescue package potentially of similar size to ensure Athens can stay afloat until at least 2014, warding off a devastating default that would reverberate across Europe.

“Membership of the eurozone brings many mutual dependencies that represent the advantages of a monetary union,” Trichet said.

Other eurozone members that have found themselves under market pressure, such as Italy, will not need a bailout, he claimed.

“I am confident they are capable of reinforcing their credibility,” he said.

Trichet said the ECB did not expect the debt crisis to cause a recession in the eurozone, adding the bank’s governing council saw the risks as balanced.

Agence France-Presse
Agence France-Presse
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