Bank tax to help Greece worth studying: France

18th July 2011, Comments 0 comments

The eurozone is considering a tax on banks to raise funds to help debt-stricken Greece, a way out of the impasse on how to proceed without risking a default, French European Affairs Minister Jean Leonetti said Monday.

"It is one of the solutions being talked about and would have the advantage of not involving the private banks directly (in a second Greek bailout) and so avoid the problem of a potential default," Leonetti said.

It is a proposition "worth studying," he told a press conference here ahead of a make-or-break summit Thursday on agreeing a Greek rescue and so taming the eurozone debt crisis which now threatens Italy and Spain.

The European Union and International Monetary Fund have bailed out Greece, Ireland and Portugal to stabilise their public finances and avoid a default which could unravel the whole euro project.

But since its bailout in May last year, Greece has been unable to meet its targets despite stinging austerity measures and now needs more help.

This time around, however, Germany, the eurozone's paymaster, is insisting that private creditor banks bear some of the burden rather than just leave it to the taxpayer to stump up again.

The European Central Bank is adamantly opposed because forcing private creditors to effectively take losses on their holdings of Greek government bonds would amount to a default -- a point made by the top ratings agencies too.

France had suggested that the banks could take part in a second Greek rescue on a "voluntary" basis but the ratings agencies said that would not make the grade, leaving the eurozone floundering for a new way out at Thursday's summit.

German press reports said the tax on the banks would apply to all -- not just those holding Greek debt -- and the idea is being floated as a way of bridging the deep divisions within the eurozone on how to proceed.

Leonetti said the way forward "of course comes through a Franco-German accord... (for both sides) share the desire to save the euro and to stabilise Europe."

© 2011 AFP

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