Debt and divisions in the eurozone

OPTIONS FOR GREECE

Germany wants to persuade existing holders of Greek debt to exchange their debt for new bonds that would mature only after seven years. If all existing bondholders took part, it would mean that additional international loans might not be necessary, or at least they would be much smaller.

However, credit-rating agencies have indicated that they would consider this to be a default. They say that in order to obtain a sufficiently high level of participation, the process could not be seen as voluntary. Critics say that this would risk spreading contagion to the rest of the eurozone.

Private creditors could be persuaded to agree to a voluntary rolling over of bonds – a course of action favoured by the European Commission, the European Central Bank and France. Banks would be asked to exchange their existing Greek bonds only when they mature and with new bonds that mature at a later date. The Commission calls this a ‘Vienna initiative' as it would be similar to a pledge made by banks in 2008 to roll over debt when the crisis affected countries in eastern Europe. Opponents say that this would achieve nothing more than postponing Greece's problems.