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Banks struggle to agree on Greek aid plan

By Reuters
Thursday, July 7, 2011 8:16 EDT
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ROME (Reuters) – International banks, under pressure from European governments to roll over their holdings of Greek debt, tried again to come up with a joint rescue plan on Thursday after talks over a French proposal fell apart.

European Central Bank and Greek government officials as well as international and Italian banking executives met lobby group the Institute of International Finance (IIF) in Rome on Thursday, an Italian Treasury source said. Another source close to the discussions said Deutsche Bank took part.

The banks are struggling to strike a deal which would let private sector creditors provide cash and breathing space to Greek debtors without being defined as a default by credit ratings agencies – which have warned they are watching closely.

Adding to that difficulty the banks themselves are split on how best to construct the aid. Thursday’s meeting followed a similar one organized by the IIF in Paris on Wednesday at which “a menu of options” was discussed, according to Charles Dallara, the managing director of the bank lobby group.

A French proposal for a rollover in which bondholders would reinvest at least 70 percent of the proceeds from bonds maturing before the end of 2014 in new 30-year Greek debt has run into ratings agency objections.

Officials are now looking at a broader range of options.

The Treasury source confirmed that the meeting had broken up around midday GMT.

The source said earlier that there would be an exchange of views on “developments so far and the solutions currently on the table for the involvement of private creditors” adding “different possibilities will be discussed, not just one solution.”

The meeting was to be chaired by Vittorio Grilli, director general of the Italian Treasury, in his capacity as chairman of the European Union Economic and Financial Committee.

An EU source also confirmed the meeting in Rome and said EU representatives would be attending. However no representative from any of the ratings agencies was expected to be present.

Following the effective veto on the French plan by ratings agency Standard and Poor’s, which said it would consider the operation contained in the proposal as a selective default, the search has widened for an alternative plan.

Germany has raised other possibilities including getting banks holding Greek bonds to swap them for new bonds with longer maturities but that proposal has not found favor with banks and some other European governments.

German Deputy Finance Minister Joerg Asmussen said the idea of a bond exchange could be put back on the table, with talks likely to take place over the summer.

On Thursday, Dutch Finance Minister Jan Kees de Jager was quoted by the daily Het Financieele Dagblad as saying that private sector banks must be pressured into taking part in a bailout as a voluntary deal was not realistic.

(Reporting by Francesca Landini in Milan; writing by James Mackenzie; editing by Sophie Walker)

Reuters
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