Berlin, German banks discuss Greek rollover

30th June 2011, Comments 0 comments

German Finance Minister Wolfgang Schaeuble will make a statement at 3:00 pm (1300 GMT) after talks with banks on their participation in a second Greek rescue, the government said on Thursday.

According to Dow Jones Newswires, the banks and Berlin have reached a deal on a draft plan, although one person familiar with the matter said the issue of which Greek bond maturities might be extended was still open.

On Wednesday the Greek parliament approved in a critical vote a 28-billion-euro ($41-billion) austerity package demanded by its creditors for a 12-billion-euro lifeline to stop Athens defaulting on its sovereign debt.

Passed by MPs amid clashes between Greek demonstrators and police, the funds are part of a 110-billion-euro aid package agreed last year with the European Union (EU) and the International Monetary Fund (IMF).

Greece now needs a second bailout of around the same volume, but Germany, the EU's main paymaster, has been pressing for private holders of Greek bonds to contribute by extending maturities on Greek bonds they hold.

Greece's first bailout went down badly in Germany with voters resentful of their taxes being used to pay for what they saw as others' mistakes and the EU becoming what critics called a "transfer union".

Merkel told bankers in a speech on Wednesday: "If you want to be able to continue working in stable countries, then lend us a hand and do so with a modicum of goodwill."

But there are concerns that rating agencies will see any rollover of Greek debt by banks and insurers as non-voluntary and declare Greece in default, something which some oberservers fear could be calamitous for the global economy.

The European Central Bank, the largest single holder of Greek debt as a result of its efforts to keep the European banking system operational, will not participate, its chief Jean-Claude Trichet reiterated in Brussels on Thursday.

The ECB has acquired 47 billion euros' ($68 billion) worth of Greek government bonds on secondary markets under its Securities Market Programme, according to Deutsche Bank Global Markets Research.

German banks hold about 20 billion euros invested in Greek assets, according to Deutsche Bank, the largest private lender, their exposure second only to that of French lenders.

President Nicolas Sarkozy said earlier this week that French banks had signalled their willingness to participate in a deal that would see maturities on some bonds extended by 30 years.

Germany's finance state secretary Joerg Asmussen was quoted as describing the French plan as a "good foundation for discussion" on Tuesday.

© 2011 AFP

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