GO
Loading...

Enter multiple symbols separated by commas

Euro Zone Lost Investors' Trust: ECB Official

The European Union lost investors' trust in sovereign debt when the EU forced them to take losses on Greek debt last year, the governor of the Central Bank of Cyprus told CNBC Friday.

Euro bills and coins
AP
Euro bills and coins

"During the crisis we lost the trust of investors in European sovereign markets," Athanasios Orphanides said Friday, the same day the euro fell below $1.27 for the first time since September 2010.

Thanks to the EU's decision to impose 50-percent losseson holders of Greek debt, "we have actually created a lot of credit risk in the minds of investors, and this has put pressure on markets in a number of other countries."

Governments "should try to honor their commitments" rather than impose "haircuts," or a losses, on investors, said Orphanides, also a member of the European Central Bank's Governing Council.

"By making a political decision on the European level to impose haircuts on Greece, we have created doubts about possible haircuts in other countries," he said.

He said the European leaders' decision during their December summit to adopt a new fiscal compact "strengthens considerably the fiscal framework in the euro area" and is "an important step on the way to solving the sovereign crisis. But that is just one step and more needs to be done."

He would not say directly whether Europe is in a recession, but noted ECB projections published last month were "worse than three months ago and shows weakness that was not there three months ago." Still, he said, "if you look at the data country by country you see some members growing quite rapidly" while "other member states are facing difficulty."

— Reuters contributed to this article.

Contact U.S. News

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    Please choose a subscription

    Please enter a valid email address
    To learn more about how we use your information,
    please read our Privacy Policy.

Don't Miss

U.S. Video

  • Grexit a 'danergous experiment': Larry Summers

    Larry Summers, Harvard University, shares his thoughts on whether Greece can be saved and what would likely happen if Greece left the euro zone.

  • This Day in History, June 30

    On this day in history, in 1953 the first Corvette was manufactured, in 1994 the U.S. Ice Skating Federation bans Tonya Harding for life, and in 2000, President Clinton signs the Electronic Signature Act.

  • Is Tsipras considering last minute deal?

    Greece is on the verge of default as a critical payment comes due today, reports CNBC's Michelle Caruso-Cabrera.