Dutch Central Bank President Discusses Possible Greek Default

A Greek default “is one of the scenarios,” Klaas Knot said in an interview published in a Dutch newspaper. He also added: “I won’t say that Greece cannot default”.

Knot’s comments, who is the recently installed president of De Nederlandsche Bank and a member of the governing council of the European Central Bank, seem unusual, since previously Central Bank has opposed sovereign default as a solution.

“I have long been convinced that a default is not necessary,” Knot stated. “But the news from Athens is sometimes discouraging. All efforts are aimed at preventing this, but I am now less positive in ruling out a default than I was a few months ago”, Knot explained.

A Greek default could send shockwaves through the eurozone banking system and the global economy. European officials have tried to prevent one because it could mean losses for banks that hold Greek government bonds. Greek bondholders have already agreed to take a 21 percent loss on the value of their investments in a swap for new bonds.

Nevertheless, many economists believe that the current swap arrangement does not give Greece enough debt relief.

(source:The Washington Post)