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Greece must repay debt
27 january 2015

But talks on debt-maturity extension possible

he new Greek administration will have to repay the country’s debt, which is ultimately owed to taxpayers in the eurozone, even though talks on a debt-maturity extension are possible, European Central Bank executive board member Benoît Coeuré said Monday.

The new government to be formed in Greece in the coming days will have to respect its commitments and continue repaying its debts as talks on debt maturity start, Coeuré said in an interview with French radio station Europe1.

His comments came after Greek voters on Sunday handed victory to radical left party Syriza, led by Alexis Tsipras, in a popular rebellion against the bitter economic medicine Greece has swallowed for five years and as a rebuke to fellow European countries that prescribed it.

“Mr. Tsipras must pay, those are the rules of the game, there is no room for unilateral behavior in Europe, that doesn’t rule out a rescheduling of the debt,” Coeuré said. “If he doesn’t pay, it’s a default and it’s a violation of the European rules.”

The European Union’s institutions are eager to talk and cooperate with Greece, he added.

Tsipras had staked his campaign on resistance to austerity measures that include budget cuts and tax increases demanded in return for a €240 billion ($269 billion) bailout.

Since Greece owes most of its debt to eurozone countries — ultimately to each country’s taxpayers — any decision on a debt rescheduling must be made by the finance ministers of eurozone member countries.

Greece owes around €40 billion to France and €60 billion to Germany, Coeuré said. “The debt is owed to taxpayers, not speculators or financial markets, canceling that debt would be a €40 billion gift to Greece,” he said.

The French banker said the Greek situation is unlikely to affect other countries in the EU periphery such as Portugal or Ireland. “Financial markets understand the situation is different,” he said.

marketwatch

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