European Central Bank Executive Board member Juergen Stark rejected the idea of a Brady Plan-style solution for Greece, as it would violate no-bailout principles.
The plan, better known as the "French formula", envisaged offering creditor banks bonds guaranteed by the European Union which would replace current Greek bonds. Such a measure would have encouraged investors to maintain their exposure to riskier members of the euro area.
Stark, one of the most influential decision makers within the ECB, rejected the idea. In an interview with the German newspaper Die Zeit, he declared that the Brady bond solution is “an unsuitable tool. It would break the support ban – the non-rescue clause of Article 125 of the EU Treaty.” “We have rules in the monetary union and we have to respect them,” he added.
Stark also said that a Greek debt restructuring would necessarily be followed by a collapse of the economy.
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