ECB executive board member Benoit Coeure said Monday it is no longer a matter of debate that Greece will need its debt restructured and called for greater political integration of the eurozone.
On the debt restructuring, Coeure told the French daily Le Monde that “there is no more debate about that” and European leaders have signalled they are ready to discuss the issue.
“The question isn’t knowing whether a restructuring is needed … but which way to do it,” said Coeure.
However, he emphasised “the importance of making that restructuring, whatever form it takes, conditional upon applying measures that reinforce the economy and sustainability of Greek public finances.”
The Greek government has been calling for its debt load — worth 170 percent of annual output — to be lessened.
Greece’s debt load would increase further as the third bailout worth up to 86 billion euros ($94 billion) which it is now negotiating would also take the form of loans.
Eurozone nations have been reluctant to consider a major restructuring that would entail creditors writing down the value of the amounts owed to them as they now hold most of Greece’s debt.
But even Germany, initially opposed to restructuring, has accepted in principle the idea of reducing interest rates and pushing repayment dates on Greece’s debt.
But there are many questions yet to be resolved.
The Internatonal Monetary Fund, which has also been involved with Greek rescue packages, wants a debt deal before the third bailout is agreed.
Germany’s position is less clear.
– ‘Eurozone exit genie’ –
Coeure also called for greater political integration in the eurozone to get out of the current situation where the member governments are hobbled by political opinion at home.
“It is urgent we abandon this inter-governmental process for a shared decision-making process founded on votes and democratic legitimacy”, otherwise the eurozone will be repeatedly confronted with the same type of crisis, he said.
“The Greek crisis freed the eurozone exit genie and it won’t easily go back into the bottle,” said Coeure.
Italian Finance Minister Pier Carlo Padoan made similar comments to the Financial Times, saying the Greek crisis had made a euro exit and the irreversibility of the monetary union a real possibility.
“Let’s not fool ourselves. If we want to take that risk away, then we have to have a different euro – a stronger euro,” Padoan was quoted as saying.
In Berlin, a finance ministry spokeswoman said that the discussion on such subjects had “just started” and would continue over the “long term”.
She said no concrete proposals were expected in the coming weeks.
In its latest edition the weekly Der Spiegel reported that plans were firming up in Berlin and Brussels to give the eurozone a finance minister and a proper budget of its own financed with a dedicated tax.
French President Francois Hollande also recently called for the eurozone getting a budget of its own, with a small number of member states moving forward with greater integration.
The proposal did not elicit any response from Germany at the time, but Finance Minister Wolfgang Schaeuble has long been an advocate of deeper eurozone integration.
But German officials have also made known deeper integration will entail changing European treaties, a labourious process with no guarantee of success.
“At a certain point the discussion will lead to a result”, but it is impossible to speculate on that at the moment, a spokesman for German Chancellor Angela Merkel said Monday.