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Greek report Greek report
by Euro Reporter
2011-06-10 08:23:39
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European Central Bank’s Trichet rebuffs German bailout demands

The European Central Bank will oppose any deal to address Greece’s debt problems that involves forcing the nation’s lenders to take a loss, ECB President Jean-Claude Trichet said Thursday, making it clear there will be no easy resolution to the crisis. He warned at a news conference that forcing worse terms on bondholders could cause adverse ripple effects across the global economy. Trichet’s comments came after the German finance minister argued this week that creditors — who are owed hundreds of billions that Greece cannot afford to pay — must share in losses rather than expecting other governments to bear the entire burden in the form of a bailout.

Trichet also said the central bank will maintain “strong vigilance” against inflation, a signal that the ECB is likely next month to raise interest rates for the second time this year. That would put the ECB further at odds with the U.S. Federal Reserve, which is maintaining its policy of ultra-low interest rates. Trichet’s comments on the Greek debt crisis come at a sensitive moment when key decisions are being made that will have an impact far beyond the relatively small Greek economy. A three-way game of chicken is underway, with the European economy — and possibly the global economy — in the balance. Investors have lost faith in Greece’s ability to repay what it has borrowed. As a result, it cannot borrow money to roll over its debts in private markets.

Some European governments, led by Germany, want to shift some of the burden of Greece’s predicament to bondholders who lent the country money. That would mean changing the terms of Greek bonds so they would be paid off further in future. Changing the original terms could put the Greek government in default. The bondholders — among them many European banks, insurance companies and other large firms — want every penny owed to them and are reluctant to agree voluntarily to accept losses. And the ECB insists that the terms be upheld unless changes are agreed to by the nation’s creditors. If bondholders were forced to take losses, the ECB could refuse to take Greek debt as collateral in exchange for access to cash, which would be devastating for many European banks. If no agreement can be reached that satisfies all three sides, the Greek government could default. Not paying back its creditors would mean risking financial devastation akin to that after the bankruptcy of the Wall Street investment bank Lehman Brothers in 2008.

The question now is who will blink.


Germany MPs discuss resolution on Greece aid

German members of parliament are discussing on Thursday a joint motion for a resolution demanding the fair participation of private creditors in future aid to Greece, a draft of the paper obtained by Reuters said. The deputies from all three parties in Chancellor Angela Merkel's centre-right coalition are demanding to have a say in agreements for new aid packages, the resolution said. "The German parliament urges the government to only agree to new financial aid for Greece if an appropriate participation of private creditors has been introduced," the document said.

"That way Greece's ability to carry its debt and so that a fair distribution between public and private sides can be reached." The document is not binding for the German government, but can be seen as a guideline for its leaders when they enter negotiations with other EU leaders. Policymakers aim to have a deal ready for a June 20 meeting of EU finance ministers and euro zone governments have edged closer to a compromise this week. How to involve the private sector, however, has been hotly contested within the single currency bloc.

German Finance Minister Wolfgang Schaeuble in a letter earlier this week proposed a swap in which private debt holders would trade in their Greek government bonds for new ones, giving Greece an extra seven years to work through its debt. France on the other hand, was against any form of debt restructuring, but sources familiar with government thinking said on Thursday it could back a private-sector rollover if a voluntary formula could be found to avoid wider damage markets. The resolution also demands for renewed IMF participation for any new rescue package and demands Greece produce reliable earnings from privatizations.


Suspected FBI-INTERPOL hacker arrested in Greece

A suspected hacker linked to attacks on computer systems of the International Criminal Police Organization (INTERPOL), Pentagon, National Security Agency and the Federal Bureau of Investigation was arrested in Greece Wednesday. Computer security firm Sophos said Wednesday night that the 18-year-old, whose name was withheld, was said to live with his mother in the Athens district of Agios Dimitrios.

The suspect is alleged to have originally broken into the Interpol crime-fighting website when he was just 15 years old, a Sophos blog post said. If found guilty, the man could face up to five years in prison for the hacks. Sophos quoted Manolis Sfakianakis, head of the Greek computer crime police, as telling state television that the young man used the Internet name "nsplitter." He said the teen would attack websites around the world from the comfort of his home.

Also, "Nsplitter" is said to have stolen credit card and banking details from victims' computers by tricking them into downloading malicious toolbars. The alleged hacker is said to have invested in nearly fifty companies on the Athens stock exchange. A search of the suspect's home yielded money and computer equipment, as well as a makeshift explosive device, flares and shotgun cartridges. Sophos said US; French and Greek authorities worked on the investigation since the hacks in February 2008 and February 2009.

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