Eurozone finance ministers fail to agree on new aid for Greece

14:31, June 15, 2011      

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L-R) European Commissioner for Economic and Monetary Affairs Olli Rehn, German finance minister Wolfgang Schaeuble, Luxembourg Prime Minister Jean-Claude Juncker, Finish Finance Minister Jyrki Katainen and French Finance Minister Christine Lagarde have a talk prior to an extraordinary Eurogroup Ministers meeting on the Greek problem at the EU Council headquarters in Brussels, capital of Belgium, on June 14, 2011. (Xinhua/Thierry Monasse)

Finance ministers of eurozone countries failed to agree on a new financing plan for Greece at an emergency meeting here on Tuesday, fighting over the degree of private sector involvement in additional rescue for Athens.

"There has been no result," German Finance Minister Wolfgang Schaeuble told reporters after talks in Brussels which ended late Tuesday.

The emergency meeting of eurozone finance ministers had been called to build consensus on the degree of private sector involvement in the new rescue plan for the debt-laden Greece.

Germany, European paymaster, has insisted on significant involvement of private bondholders if further aid to Greece has to be delivered.

Schaeuble said last week that the holders of Greek debt should be forced to extend the maturities of their debt by seven years to prevent a bankruptcy, a move credit rating agencies said may amount to a default.

Germany's position was backed by the Netherlands.

The European Central Bank (ECB), however, warned that any forced involvement of private bondholders would create chaos in the financial markets.

Instead, the ECB, supported by the European Commission and France, is pushing for a plan under which bondholders voluntarily agree to buy new Greek bonds to replace maturing debts, thus giving Greece longer periods to pay back.

Italian central banker Mario Draghi, who is due to take over as president of the ECB later this year, said Tuesday that private investors could be involved in a solution for Greece provided that this was "entirely voluntary." He rejected the option of a debt default.

"The cost of a real default will exceed the benefits and will not address the root causes. Moreover, we do not know what contagion effects it will have," Draghi said at a European Parliament hearing, reiterating the ECB's opposition to any compulsory involvement of the private sector.

Belgian Finance Minister Didier Reynders also warned about the dire consequences of forcing the private sector to become involved.

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