FRENCH BANKS have offered to help Greece avert a sovereign default by giving it 30 years to repay some of its debts, President Nicolas Sarkozy said yesterday.
The plan for a debt rollover, which would see the banks reinvest in Greek sovereign bonds with longer maturities, follows talks between the French finance ministry and the financial institutions.
French banks are among Greece’s biggest creditors, with $53 billion (€37 billion) in overall net exposure to Greek private and public debt, according to the Bank for International Settlements.
“We won’t let Greece fall. We will defend the euro, because it is in all of our interests,” Mr Sarkozy said.
The idea has been submitted by French banks to European creditors and was discussed at a meeting in Rome yesterday of the Institute of International Finance, a group of banks and other financial institutions.
Citing the draft deal, newspaper Le Figaro said French banks would reinvest 70 per cent of the proceeds of their holdings of Greek debt maturing between now and 2014 back into new long-term Greek securities: 50 per cent in 30-year bonds and the other 20 per cent in high-quality bonds as insurance to guarantee repayment of the 30-year bonds.
France says the scheme will be for all creditors and also wants insurers and pension funds to participate.
“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,” Mr Sarkozy said. He added that he hoped fellow EU governments would support the French plan.
EU leaders agreed last week that extra public financing to help Greece avoid bankruptcy would depend on the voluntary involvement of private sector bondholders in a way that did not cause a “credit event” and that credit ratings agencies did not define as a selective default.
Germany, meanwhile, declined to comment on its own ongoing talks with bankers.
A spokesman for the finance ministry said talks were continuing outside Berlin with a goal of presenting a final deal on July 3rd.
“After rejecting the idea of private sector involvement outright, we welcome today’s French announcement, though it is in itself meaningless until the global figure is known,” said a German finance ministry official, referring to the funding figures to be published in the upcoming troika report.
On the table is a German proposal to swap Greek sovereign bonds due in mid-2014 for new five-year bonds.
“We are confident banks will welcome this opportunity to be part of a rescue deal,” said a source close to the talks.
The exact sum being discussed is still shrouded in mystery – reports of German exposure to Greek debt vary from €20 billion to €60 billion. Official sources say the figure on the table is “much lower than the €60 billion reported”.