90 percent of banks will accept Greek losses: IIF chief

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More than 90 percent of big banks are expected to take part in a voluntary "haircut" on their holdings of Greek debt agreed with EU leaders, the lenders' chief negotiator said on Sunday.

Charles Dallara, head of the Institute of International Finance (IIF), which represents large banks, told Germany's Welt am Sonntag weekly: "I am very optimistic that more than 90 percent of the banks will participate."

"I can't speak for the other creditors from the insurance and hedge fund sectors. Here, there is certainly more persuasion work to be done," Dallara added.

In marathon talks on Wednesday, EU leaders, spearheaded by German Chancellor Angela Merkel and French President Nicolas Sarkozy, convinced private investors to accept a loss of 50 percent on their holdings of Greek paper.

The move was seen as crucial to avoid Greece defaulting on its debt and propelling the eurozone crisis, already the worst in the bloc's history, to new heights.

The deal aimed to slice a whopping 100 billion euros off the 350-billion-euro debt pile hampering Greece.

Dallara offered an insight into the torturous negotiations in Brussels that dragged on well into the early hours of Thursday morning.

"At first, we did not think we would meet the heads of government. But the state guarantees that were on the table were not enough for us to accept the 50-percent haircut," he said.

"Then Angela Merkel got involved and raised the guarantees from 20 to 30 billion euros. That clinched the deal," he said.

Dallara also expressed optimism that the insurance model in place to attract investors to Spanish and Italian bonds could also be "very efficient."

Asked if he believed Wednesday night's gruelling session would be the last negotiations over Greek debt, he replied: "Yes. Of that I am certain."

© 2011 AFP

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