A massive debt write-down for Greece will stabilise the eurozone by removing a threat posed by its “weak link,” a strategist with investment bank Goldman Sachs said in an interview published yesterday.
Greece needs a so-called PSI, or private-sector involvement, deal to be ironed out, as well as a second EU bailout, if it is to be able to make a debt repayment of €14.4 billion on March 20.
With those two deals in place, a “systemic danger in the eurozone, which comes from the weak link, that is, Greece,” will be removed; Francesco Garzarelli was quoted as telling the Greek daily To Vima.
Mr Garzarelli, head of the US bank’s macroeconomic research section, said that by 2014 much of Greece’s debt will be transferred from the private sector to eurozone institutions, while a new balanced budgets treaty will apply to all member states.
He said the sovereign debt of Greece, Italy and Spain, for example, would become a debt for the entire eurozone, dissipating the previous threat, adding: “The eurozone will be stabilised.”
Negotiators from the Institute of International Finance, which is representing banks and financial institutions owed money by Greece, and the French bank BNP Paribas began crunch talks with Athens last Wednesday.
The negotiations on cutting around €100 billion ($129 billion) from Greece’s massive debt of more €350 billion were adjourned on Friday with both sides expressing optimism about the outcome.