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(Updates with additional Gurria comments in sixth paragraph.)
Oct. 3 (Bloomberg) -- Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said investors should take larger losses on Greek debt than those outlined in agreements reached in July.
The existing plan “doesn’t reduce the debt practically, but rather it increases it,” Gurria said in an interview in Madrid today. “What we need to do is reduce the burden” with private-sector involvement, he said.
The European Commission is resisting a push to impose bigger writedowns on banks’ holdings of Greek government debt than those agreed to at a July 21 summit, a European official said on Sept. 28 on condition of anonymity. Banks agreed in July to contribute at least 50 billion euros ($67 billion) to a second rescue package for Greece via a debt swap.
“The problem is that we started out saying no one is going to lose anything here,” Gurria said today.
Bondholders are in the midst of consultation with authorities on the debt swap, which the Institute of International Finance lobby group estimates will amount to a writedown of 21 percent. That 21 percent nominal reduction applies to just a quarter of the debt, Gurria said.
“The problem here is what I call the original sin: that there was a country that got itself over-indebted and creditors that over-lent,” Gurria said.
--With assistance from Rebecca Christie in Luxembourg. Editor: Jones Hayden
To contact the reporter on this story: Emma Ross-Thomas in Madrid at email@example.com
To contact the editor responsible for this story: Craig Stirling at firstname.lastname@example.org