France seeks 30-year lifeline for Greece
President Nicolas Sarkozy said France is working with private lenders on a new, long-term rescue plan for debt-ridden Greece as lawmakers in Athens began a crucial review of the government's latest austerity measures.
Meanwhile in Rome, private banks who are owed billions of euros by Greece, began talks with EU officials on how to restructure debt without causing a default which many say could pose severe dangers for the eurozone and global markets.
Sarkozy told a press conference that France was working on a 30-year scheme to give Greece time to get on top of its debt mountain, which is now worth more than a year-and-a-half of the country's total output.
"We have concluded that prolonging loans over 30 years, and putting them on the level of European loans indexed on Greek growth, would be a system that all countries might find useful," Sarkozy told reporters.
"We have worked very hard, the finance ministry has worked very hard with the banks and insurance companies ... on what could be a voluntary participation by the private sector," Sarkozy said.
In the next three years, Greece is due to repay about 64 billion euros ($90.4 billion) of debt.
There has been pressure, in particular from Germany, for private investors to bear part of the cost of a second rescue for Greece, which is now being cobbled together.
Sarkozy, who holds the presidency of the G20 leading countries, said he hoped that fellow European Union governments would back the French plan.
"We won't let Greece fall. We will defend the euro. It's in all of our interests," the French president insisted.
Sarkozy's remarks gave substance to reports that under the embryonic scheme being negotiated in Rome, banks would roll over half of the money they should receive from maturing Greek debt into new 30-year bonds.
A further 20 percent of the money due would be reinvested in high-quality bonds, with interest being paid only at the end of the life of the loan.
A three-hour meeting at the Italian treasury was headed by Vittorio Grilli, director general at Italy's treasury and chairman of the eurozone's economic and financial committee, and Charles Dallara, managing director of the International Institute of Finance, a forum for leading global banks.
No decisions were taken at the meeting, according to a Italian government source, who characterised it as an exchange of views at the technical level.
Several leading figures in the European Union and eurozone have spoken in increasingly worried terms in recent days about the domino dangers of the Greek crisis.
The Greek problem is essentially in two parts. The first concerns crash budget reforms to obtain urgently needed funding under a first EU, International Monetary Fund rescue set up 12 months ago.
Greek lawmakers began debating those measures and were set to hold a vote by Thursday.
The second part concerns talks on a second overall rescue, which is likely to be roughly the same amount as the 110 billion euro bailout Greece received last year from the IMF and the European Union.
"The contours are still being discussed and will continue to be discussed in the coming two weeks," said Amadeu Altafaj, spokesman for EU economic affairs commissioner Olli Rhen, separately in Brussels.
The French plan is set against the background of how to engage private holders of Greek debt without causing financial markets and credit rating agencies to describe the changes to Greek debt as default.
A default rating could have wide-ranging consequences within the eurozone and even for global markets.
Another concern is that discriminatory treatment could cause an outflow of funds from Greece, and also ramp up pressure on fragile eurozone countries such as Ireland and Portugal, already the subject of rescues, and possibly Spain or even Italy and Belgium.
On Monday, yields on 10-year Italian bonds rose above five percent for the first time since 2008 as Rome scrambled to cut spending to head off a possible downgrade of its credit rating.
© 2011 AFP