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ECB chief accuses UK over Greece

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Vested interests in Britain and the United States are fuelling market pressure on Greece, a leading banker has claimed

Vested interests in Britain and the United States are fuelling market pressure on Greece, a leading banker has claimed

Vested interests in Britain and the United States are fuelling market pressure on Greece, a leading banker has claimed

The European Central Bank's chief economist has said a Greek debt restructuring would be a "recipe for catastrophe" as he blamed "vested interests" in Britain and the United States for fuelling market pressure on the country.

Juergen Stark told a financial conference in Greece the struggling eurozone country's "debt sustainability is insured" if it fully complies with its internationally monitored austerity programme.

Asked about the markets' hostility to Greek efforts, Mr Stark said: "This is not the view of all market participants, to be very clear. This is a discussion triggered from London and New York. I don't know what is behind it - vested interests, people topping their books and so on. So it's more complicated than just (saying) what markets expect."

Greece's Socialist government was told by the European Union this week to take urgent measures to keep its austerity programme on target, as part of its commitments for the 110 billion euro (£97 billion) package of bailout loans it is receiving from EU countries and the International Monetary Fund.

The country remains frozen out of bond markets by sky-high interest rates as investors fret that Greece may eventually have to restructure its debt, which is set to top 150% of gross domestic product this year.

Mr Stark said the restructuring option had not been properly thought through. "Debt restructuring would wipe out part or all capital of Greek banks," he said. "So it would be a recipe for catastrophe."

He urged Greece to "double its effort" on structural reforms that critics say have been stagnating and insisted that the austerity measures would be enough to bring the country back to its feet. "Greece is solvent. This is an important message."

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Mr Stark's comments underlined the split among European officials over whether Greece should consider delaying repayment of its crushing debt load. Jean-Claude Juncker, head of the eurozone finance ministers group, held the door open on Tuesday to what he called a "reprofiling" of Greece debt - a voluntary extension of bond maturities.

Officials are concerned Greece's troubles could harm Europe's economic recovery by inflicting losses on banks elsewhere in Europe that hold Greek bonds.

European officials are weighing up whether to give Greece another bailout. Last year's rescue loans were aimed at giving the country breathing space so it could return to borrowing from bond markets next year. But it remains unable to borrow from private investors as its economy deteriorates and it struggles to meet the terms of the first bailout.


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