A senior lawmaker from German Chancellor Angela Merkel's conservatives said on Saturday the euro zone's permanent rescue mechanism should be introduced sooner than mid-2013 to beef up private creditors' response to the Greek debt crisis.
With concern swelling about a possible Greek sovereign debt default as Athens struggles to meet the terms for its European Union and International Monetary Fund bailout, policymakers in the euro zone are readying for an escalation of the crisis.
Nobert Barthle of the Christian Democrats (CDU), who sits on parliament's budget committee, said an earlier introduction of the permanent European Stability Mechanism (ESM), due in mid-2013, would help respond more forcefully to the crisis.
I think it would make sense to push further in this direction, Barthle told Reuters, arguing that the ESM, with an effective lending capacity of 500 billion euros, will include Collective Action Clauses (CACs) prevent one bondholder from blocking a debt restructuring deal at the expense of others.
These clauses would be included in all euro zone government securities from July 2013 under the original timetable for the ESM, which has yet to be ratified by national parliaments after they first approve granting new powers to the EFSF.
Barthle said that by bringing forward the introduction of the ESM we could get access to the CACs sooner, which would be extremely helpful.
The banks must see that, if it came down to an orderly insolvency, they could not remain outside, said Barthle.
Merkel said 11 days ago it was no longer taboo to talk about an orderly Greek default, that the euro zone would lack a mechanism for such a scenario until the ESM comes into power in 2013.
We do not currently have such a mechanism and that's why the ESM has to come into force, she said on September 13.
(Reporting by Andreas Rinke; Writing by Stephen Brown; Editing by John Stonestreet)