German bank group rejects higher Greek debt write-down

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The head of Germany's banking federation said Tuesday that banks should first take a 21-percent loss on Greek debt already agreed before further measures are discussed to ease the eurozone crisis.

Banks agreed in July to accept a 21-percent "haircut" on the debt of crisis-wracked Greece but markets already consider this insufficient and speculation has grown that a write-down of as much as 60 percent is required.

But Michael Kemmer, the head of the BdB banking federation, told ARD television in Germany that the 21-percent "haircut" was already a "massive contribution."

"It will not help to bring back the confidence of the financial markets if we start talking about second and third measures before we have finished the first.

"Let us first get this 21 percent through. That would help the Greeks out a fair bit and then we'll see," he said.

German Finance Minister Wolfgang Schaeuble conceded Sunday that the July deal might not have gone far enough.

The head of the eurozone finance ministers, Jean-Claude Juncker, told Austrian television late Monday that 60 percent might be a more realistic figure.

Kemmer also rejected a blanket approach to bank recapitalisation in Europe, saying that officials should look at individual lenders on a case-by-case basis and see where additional cash injections were required.

The European Banking Authority is conducting an audit of banks' capital to say how much extra liquidity is needed to cover potential losses stemming from their holdings of Greek debt.

The International Monetary Fund estimates it could cost as much as 200 billion euros ($272 billion) to shore up Europe's banks.

German banks, insisted Kemmer, were healthy. "They are well stocked. They have been raising their capital in recent months. They are stable. Their exposure to Greece is manageable," he said.

"After the (global financial) crisis in 2008, the German banks did their homework, they improved their risk management, they boosted their capital.

"Compared to other banks internationally, the German banks are doing well," said Kemmer.

© 2011 AFP

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