German Finance Minister: Can’t Let Individual Creditors Prevent Debt Burden Restructuring

20 May, 2021

By David Barwick – Frankfurt (Econostream) – German Finance Minister Olaf Scholz on Thursday said that individual creditor groups cannot be allowed to prevent necessary restructuring of sovereign debt burdens.

In a speech before German parliament on the reform of the European Stability Mechanism, Scholz called the ESM ‘a way for European countries to react jointly and in solidarity to a crisis in individual member states.’

‘What we are doing now is first of all ensuring that there is a final safeguard for the bank resolution fund - which is also a response to the last crisis, with the intention of ensuring that there are no banks that are too big and cause our European financial system to run the risk of instability’, he said.

The ’final safeguard’ being provided for the resolution fund will ‘send out a very clear message that we are in a position to do what is necessary to prevent a crisis in the financial system in any eventuality’, he said. ‘That is a good message for the taxpayers. The problem can be solved with the banks themselves. It is not the states that have to save the banks.’

As for the restructuring of sovereign loans, ‘we have convinced everyone’, he said. ‘It must be prevented that, if a restructuring of debt burdens is necessary, individual creditor groups can prevent this reorganisation. That is why the sovereign debt system in Europe is now being modernised.’