Recently installed president of Dutch central bank Klaas Knot said in an interview published on Friday that he no longer rules out the possibility that
Greece may not be able to pay back its crippling government debt.
A Greek default "is one of the scenarios," Klaas Knot said in an interview published in respected Dutch newspaper
Het Financieel Dagblad.
"I won't say that Greece cannot default," said Knot, who is also a member of the governing council of the European Central Bank.
Knot's comments are unusual because they come from a member of the European Central Bank's 23-member governing council. The bank has insisted Greece must stick with its bailout plan and has opposed default as a solution.
Greece to be tackled step-by-step: Merkel "I have long been convinced that a default is not necessary," Knot said. "But the news from Athens is sometimes not encouraging. 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."
Many economists say that Greece's debt burden is unsustainable and that bond markets have sent the prices of Greek bonds so low that they reflect a likely default.
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 and prompt speculation that other governments with shaky governments could face increasingly acute funding pressures.
Indians leave debt-hit Greece Greek bondholders have already agreed to take a 21 per cent loss on the value of their investments in a swap for new bonds. That loss is relatively mild by the standard of government defaults, which often inflict losses of 50 percent or more. Many economists say the current swap arrangement does not give Greece enough debt relief.
With Associated Press inputs
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