German Finance Minister Wolfgang Schaeuble on Saturday fleshed out proposals for a two-tier eurozone crisis mechanism - involving private investors but controlled by the International Monetary Fund (IMF), reported dpa.
"I envision that all bonds in eurozone states should contain clauses that precisely specify what should happen with the creditor's demands in the case of a crisis," Schaeuble told Spiegel news magazine.
He described a two-tier system, in which the EU initially launches an austerity programme if a country had trouble servicing its debt, similar to that prescribed for Greece. In this first phase, bond repayment deadlines would be extended.
"If this des not help, there will be a second phase in which private creditors need to accept a cut in their demands," Schaeuble continued. This step, referred to as a "hair cut" would be combined with guarantees on the remaining repayments.
"After all, the European Union was not founded for the enrichment of private investors," Schaeuble said.
The minister specified that the mechanism should be overseen by the IMF rather than a European institution, similar to the rescue package devised in response to the Greek debt crisis.
"There is no institution globally that has a comparable degree of expertise for restructuring, or a a comparable reputation on the markets," Schaeuble said of the IMF.
"After all, we need to convince the financial markets that the new rules work," he added.