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Lagonissi - A restructuring of Greece's massive debt would be a recipe for disaster, European Central Bank governing board member Juergen Stark told a conference near Athens on Wednesday.
"It is an illusion to think that debt restructuring, haircut or whatever would help to resolve the problems this country is facing," Stark told an Economist round-table conference in the coastal resort of Lagonissi
"Debt restructuring is a recipe for catastrophe," he said, warning that such a move would undermine the collateral adequacy of Greek government bonds and thereby "wipe out" Greek banks who use them to obtain ECB loans.
A 'haircut' is a restructuring that entails losses for debt holders.
Greece has accumulated a debt of €340bn and with the country in the process of tough austerity measures and struggling to emerge from recession, many investors doubt Athens can manage repayments.
Senior EU officials have raised the possibility of a limited restructuring of Greece's mountain of debt which could involve private sector creditors taking some of the pain.
A "soft" debt restructuring is understood to involve extending repayment schedules and easing interest rates on the debt.
A so-called "hard" restructuring is considered to mean states writing off a part of their debt, the route followed by Argentina or Mexico among the more notorious defaults in the recent past.
"This restructuring thing is a discussion triggered from London and New York," Stark said on Wednesday.
"I don't know what is behind, probably people are talking from their books."
"We should think this issue through" and consider the implications for the banking system and the real economy, the ECB policymaker said.
The Greek government has long resisted calls to restructure the debt, noting that it could lead to a collapse of state-supported social security funds that control much of it.
