The chief executive of Europe’s largest insurer, Allianz, warned governments not to push Athens toward insolvency by blocking further aid to Greece. “Europe must help its weaker countries.
The consequences of a sovereign default of Greece would be uncontrollable,” Michael Diekmann was quoted as saying in German daily Bild in an interview published on Monday.
“What would happen if there was a run on the banks and all Greek depositors were to withdraw their savings? Banks would have to close – many other regions and finance institutes would be uncontrollably infected.”
Investors are awaiting a debt sustainability report in June from the European Commission, European Central Bank and the International Monetary Fund required before a much-needed 12 billion euro tranche in aid is paid out to Athens. A spokesman for the company said the German insurer’s exposure to Greek sovereign debt stood at 1.3 billion euros as of the end of 2010, or 0.3 per cent of its nearly 400 billion euro fixed income portfolio.
The Allianz CEO said simply restructuring Greek sovereign debt would not solve the country’s problems and called for a “Marshall Plan” for Greece, referring to US aid for Europe after World War Two. “Greece cannot save itself alone through a debt restructuring. The country must not decouple itself from capital markets,” Diekmann said. “We need an industrialisation plan for Greece, a type of Marshall Plan.
European labour and production need to be shifted to the country.” In contrast to the fragile situation in Greece, Diekmann said he was pleased to see progress in Portugal towards reducing debt and, above all, in Spain, while he could observe the first indications that Ireland was also improving. Speaking about risks to Germany, Diekmann said markets were overreacting to inflationary pressures, adding his economists were forecasting no more than three to four per cent per year at most.
“That may not be low, but it’s also not excessive inflation,” he said.