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FACTDROP: Noyer Rules Out Euro-Zone Defaults Beyond Greece


Noyer Rules Out Euro-Zone Defaults Beyond Greece

Πηγή: foxbusiness
By William Horobin
Oct 16 2011

--Noyer says "probably necessary" to increase private sector role in Greece

--Private sector participation in Greece must be voluntary

--Noyer excludes any other defaults in euro zone

--French banks unlikely to need state to meet capital goals

--Strong growth possible in 2012 if confidence restored

(Adds Noyer ruling out default in other euro-zone countries in first paragraph, background in paragraphs 3 through 12.)

PARIS (Dow Jones)--European Central Bank governing council member Christian Noyer Sunday said it is "probably necessary" to increase the private sector's contribution to reducing Greece's debt mountain, but he ruled out any forms of default in other euro-zone countries.

Speaking on television channel TV5MONDE, Noyer said the scheme agreed in July reduces Greece's debt by around 21%. "I think it's probably necessary given where we are now" to increase that, Noyer said.

The euro zone is working on a plan to maximize the impact of its bailout mechanism, recapitalize its banks and stabilize Greece's debt crisis. After a meeting of heads of state in Brussels Oct. 23, Europe intends to present its plan to the Group of 20 advanced and emerging economies at a summit in Cannes at the beginning of November.

Finding a solution to reduce Greece's debt mountain will be a central part of tempering the instability in the euro zone that is now threatening the global economy. Euro-zone governments and the International Monetary Fund are examining a range of new options for Greece's private-sector creditors, including a "hard restructuring" that would see bondholders repaid only half the face value of their bonds, a person familiar with the talks told Dow Jones Newswires Saturday.

Noyer urged against a forced default of Greek debt as it would stop Greece being able to borrow for a long time.

Noyer said the behavior of financial markets is "a bit inexplicable and irrational" as they price in contagion from the Greek crisis to other members of the currency bloc.

"We can exclude any default from Italy and Spain, and Ireland and Portugal," he said.

Noyer, who is also governor of the Bank of France, sought to reassure about the impact of the debt crisis on France's banks, which have been targeted by financial markets over recent months because of their perceived exposure to Greece and the euro zone's weaker economies.

French banks are capable of absorbing losses from a greater role in easing Greece's debt burden as they only have EUR8 billion of Greek debt on their books, Noyer said.

The Bank of France governor also said French banks should be able to meet the capital goals to be defined by euro zone's comprehensive plan without using their own resources.

"We are talking about a calendar of around nine months and French banks should be able to get there essentially by putting profits into their reserves," Noyer said. If that is not possible, banks could turn to financial markets, a move that should be easier within the next six months, he said.

"In theory the state won't have to intervene. If it is the case it would be a temporary investment," Noyer said.

He also said he is confident the euro zone will find a way of maximizing the power of the European Financial Stability Facility in the coming days. Allowing the EFSF to insure sovereign bonds is one of the options being discussed, he said.

Noyer said he is confident Europe can find a way out of the crisis and if confidence is restored growth could be strong next year.

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