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ECB’s Weidmann Favors Voluntary Investor Help, Sueddeutsche Says

June 14, 2011

June 14 (Bloomberg) -- European Central Bank council member Jens Weidmann said any private-sector involvement in a second Greek bailout must be voluntary, Sueddeutsche Zeitung reported, citing a guest commentary.

“Participation of private investors is basically sensible and right” and “there can’t be any objection to a voluntary extension of maturities” on Greek bonds, Weidmann wrote in the commentary. “But it remains to be seen how obliging the investors will actually be,” he said, adding: “if a maturity extension is forced upon investors, the risks are significantly greater than the possible benefits. Then a credit event would be unleashed, which would pose great risks for financial stability.”

Weidmann, who also heads Germany’s Bundesbank, said it’s up to governments to fix the problem and the ECB cannot take on any more risk, Sueddeutsche Zeitung reported.

“If additional tasks and financial risks are continuously heaped upon monetary policy, this can endanger its purpose, namely securing price stability,” he said. “It’s important now for monetary policy that the risks already taken are reduced and absolutely not increased, so that credibility is not put at stake.”

Weidmann said private ownership of Greek sovereign bonds is “no longer as high as often supposed.” He also said governments can’t assume that euro-area central banks “will approve of maturity extensions for the bonds in their possession or accept as collateral bonds from states that are rated insolvent,” Sueddeutsche reported.

Weidmann said any further aid for Greece must be sufficient to cover the needs of the country’s banking sector, according to the newspaper.

--Editors: Ben Livesey, Kevin Costelloe

To contact the reporters on this story: Matthew Brockett in Frankfurt at

To contact the editor responsible for this story: Craig Stirling at

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