Greek Prime Minister Lucas Papademos, in an exclusive interview with CNBC, said “printing money is not an answer” when it comes to the European financial crisis, and declined to wade into the growing controversy over the European Central Bank’s role in Greek debt, saying only “I’m confident that it will take the right decisions.”
Papademos was extremely reluctant to discuss the ECB in any way, citing his belief that the central banks should be free of political interference. “We should not in any way through comments or other ways impair the independence of the Central Bank.”
Papademos is a former central banker himself, and was member of the ECB under Jean Claude Trichet. When first asked, he would say only that the ECB had performed its mandate of maintaining price stability in “in a very effective manner, during a very challenging environment.” (Read about the full interview here).
Many market participants believe that in the end, the ECB will have to turn on the printing press (currently not allowed under the EU treaty) to solve the continent’s debt crisis. When pressed on the issue, Papademos said “There is a mandate, and that mandate is guiding the policies of the Central Bank. And printing money is not the answer to the issues that you raise.”
When it comes to Greece, the ECB owns Greek debtafter having bought it in the markets at below face value. If all goes according to plan, the ECB will be repaid at full face value—essentially making a profit on Greek debt.
This galls many of the private sector creditors who are being asked to take a nominal loss of 50 percent of the face value of their bonds. Several, unwilling to be named because of the sensitivity of the matter, say they don’t expect the ECB to take a 50 percent haircut, but rather, to receive in return only what they paid originally.
Mario Draghi, the current head of the ECB, sidestepped the question when asked about last week at the central bank’s monthly press conference on interest rates.