Eurozone governments should not assume the private sector will participate in a new Greek bail-out deal, the European Central Bank has warned, escalating its conflict with finance ministers over the future of the indebted country.
the eurozone should follow “global doctrine” on bail-outs for crisis-hit nations.
Mr Trichet’s comments were the closest he has come to suggesting publicly that governments abandon attempts to involve commercial banks without ratings agencies declaring a selective default.
It is increasingly affecting how companies and banks can fund themselves.”
ECB offered further support for Portugal by waiving the minimum credit rating required for Portuguese bonds used as collateral in its liquidity operations.
He left open whether the ECB could ignore the judgment of ratings agencies but joined other European leaders’ criticism of the firms: “A small oligopolistic [rating] structure is not what is probably desirable at the level of global finance.”
Mr Trichet’s ECB council colleagues have said Greek bonds would have to be excluded from eligible collateral in the event of a default – a move that would bring down the country’s banking system. In the event of a brief selective default, however, the ECB would probably allow the Greek central bank to prop up banks with emergency liquidity assistance.
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