Amidst growing fears that cash-strapped Greece will likely default on its huge debt, one major foreign voice has declared that Athens may have no choice other than to restructure its debt.
Vince Cable, the British Business Secretary, said rescheduling Greek debt is the only viable option and that more demands on Athens to reduce its public spending would be ineffective.
European Union (EU) and European Central Bank (ECB) are reported against the idea.
Cable told the Guardian newspaper: What they [Greece] are going to have to do is to have a rescheduling of their debt and it can be done in a soft way or a hard way, and that's what the current debate is about. You can't just deal with this by cutting, cutting, cutting – it's wrong, and it does not work. Attacking the debt, and dealing with it in a more pragmatic way, is the way out of this.”
Cable added: I think in practice what will happen – people are already discussing this – is a negotiated rescheduling. It isn't an easy way out. I was quite involved in the Latin American debt crisis in the [1980s], writing about it, and what happened there was that the countries did reschedule their debts – and it was the best option, or the least worst option.”
He cautioned that restructuring debt won’t be easy or popular.
“You lose quite a lot in terms of your capacity to borrow in markets, so it's not an easy option – but given that all the other options are terrible, I'm sure that's what will happen, he noted.
Cable indicated that Greece exiting the euro makes no sense and wouldn’t solve any problems anyway.
“I don't sense that anyone in Greece or anywhere else thinks that it is,” he said.
Quite apart from the psychological impact, a very practical problem is that a lot of their debt is denominated in foreign currency anyway – dollars or whatever – so you don't escape from that by leaving the eurozone.
Among the most vocal opponents to Greek debt restructuring is Germany. Cable explained that their adamant refusal is due to the fact that German banks and financial institutions are heavily exposed to Greek debt.