Private-sector banks will not agree to further voluntary write-downs of Greek or other troubled sovereign eurozone debt, banking chiefs have warned.
The existing commitment by private sector financial institutions to take a 21% "haircut" on their outstanding Greek sovereign debt is sufficient, Josef Ackermann, chairman of the Institute of International Finance, told the bank industry association’s annual meeting in Washington.
"We achieved a deal which was fair and helps Greece to reduce its debt burden," Ackermann, who is also chairman of Deutsche Bank, said. "This is the deal and we fought for it. If we reopen Pandora’s box, I think we lose a lot of time and I’m not sure that people would be willing to participate. We need strong investor participation."
He added that the deal was a "one-off exception", and that banks would not be willing to countenance a similar move for other troubled peripheral eurozone members.
"Greece is the only country where we are willing to have some form of burden-sharing. We made it very clear that no other country could be treated in the same way. "
The comments will disappoint some European politicians, who have stressed that the private sector should shoulder a large proportion of the burden in any solution to the Greek sovereign debt crisis.
EU Monetary Affairs Commissioner Olli Rehn, speaking in Washington on Thursday, stressed the importance of the "voluntary and orderly rearrangement of Greek debt held by the private sector" to any successful solution.
The IIF led negotiations with the Greek government and eurozone leaders, which culminated in Brussels on July 21 with an agreement for IIF member banks to write down 21% of their outstanding Greek government bonds.
The voluntary writedowns are a key component of the so-called July Agreement, which forms the basis of the eurozone bailout agreement for Greece.
Ackermann insisted that the onus on finding a solution now very much rested with eurozone policymakers.
"It is absolutely clear that there is uncertainty and cacophony. What is required is that political leaders come up with coordination going forward. That creates the clarity," he said.
He said that calls for a partial or total Greek default or for the country to leave the single currency were dangerous, and risked escalating rather than resolving the growing eurozone crisis.
"A major restructuring of Greece right now would be a political problem [...] Other governments might come under pressure from the public to ask for the same thing," he said.
"Everyone should keep in mind that destruction is more expensive than construction. Breaking [the eurozone] apart would create a huge contagion impact and would end up costing much more in the end."
Echoing the message from German finance minister Wolfgang Schaeuble on Saturday, Ackermann said the best way restore confidence was for politicians to push on with implementation of the July 21 agreements, which include an expansion of the European Financial Stability Facility (EFSF).
"Our strong advice is to move on and to stick to the deal agreed in Brussels at the end of July. To reopen that debate would not be productive, and certainly would not stabilize the relatively turbulent situation we are in on a global scale."
Many economists disagree, however, and are calling for a Greek default and for the country, as well as other troubled sovereigns, to leave the single currency altogether.
Nouriel Roubini, an economist at New York University, told Emerging Markets on Friday: "We need to have also an orderly exit of countries that are not going to regain competitiveness in the eurozone, like Greece and potentially also Portugal."