It is almost certain that euro-zone countries will have to write off part of their loans to Greece, former Dutch Central Bank President Nout Wellink says.

The funds the banks have provided to save Greece are insufficient, Mr Wellink says in an interview with Dutch daily Het Financieele Dagblad. European governments have by now financed such a large part of the Greek debt that a debt restructuring is bound to affect them, Mr Wellink is quoted as saying.

“By now, the balance between the public sector (governments and the European Central Bank) and the private sector has shifted to such an extent, that once write-offs do take place, it almost inconceivable that the government will be able to avoid any losses,” the former Dutch central bank president warns.

To serve its spiralling debt, Greece has so far received 240 billion euros in loans from euro-zone nations and the International Monetary Fund. Though the exact distribution of the loans among the euro-zone countries and the IMF has yet to be determined, the Dutch contribution is currently estimated at 4.7 billion euros.

Dutch Finance Minister Jan Kees de Jager has always maintained the Netherlands will recover its loans to Greece in full. Mr Wellink, however, thinks that prospect is unrealistic. “There was an inconsistency in all the stories the politicians were giving us. One can say, as our minister did, that governments always repay their debts, but when one takes on an ever bigger portion in the financing of the Greek debt, that chance becomes smaller by the day.”

For the past two months, the Greek government has been locked in talks with the banks to secure a 50 percent write-off on its loans from the private sector. In the interview, Mr Wellink “strongly doubts” whether that write-off will be sufficient.

“Half of Greece’s private sector debt comes from Greek banks, which means that when you write them off, the Greek government will have to fill the gap with public loans. In addition, ‘sweeteners’  have been provided to entice the private sector to join the debt restructuring. All this, however, means that the net contribution of the private sector amounts to next to nothing.”

(cl/jric)

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