ECB Governing Council’s Athanasios Orphanides laments Greek haircut
The decision to force bondholders to take losses on Greek assets was a profound mistake according to Athanasios Orphanides, a member of the European Central Bank’s Governing Council.
The governor of the central bank of Cyprus since 2007, Athanasios Orphanides made the comment at a meeting of Cypriot lawmakers earlier today.
According to Reuters, he said the decision to force losses on bondholders was “a terrible mistake.”
“By forcing the impairment of any state bond we have triggered concern internationally of all state bonds in the euro zone and that’s one of the key reasons we have a problem.”
“It is because of this tragic mistake in the euro zone that the yields of so many bonds are so high.”
Meanwhile, the local Cyprus Mail further reports that Orphanides sees Cyprus falling into further recession, which may necessitate additional austerity and spending cuts.
He said that the fiscal position meant Cyprus no longer could access international capital markets, the Mail reported.
However, he added that the country would not require external support were banks to require recaptalisation if exposed to high levels of Greek debt.
“Our government can support the banking system, if required, just by issuing a bond and exchanging it for shares in a specific bank, and only if shareholders of a bank cannot raise the capital on their own.”
“There is no question of our country going into a support mechanism because of the exposure of its banks. The only case of a country requiring that kind of support is if it cannot pay its bills.”