Greece: the banks will suffer losses "substantial"
Creditor banks in Greece will have to accept losses "substantial" in the new bailout of the country, known to be substantially revised over the deteriorating economic situation, warned Saturday the European Ministers of Finance. At a meeting of central bankers in the euro zone on Friday night, "we agreed to say that we had to have a substantial increase in the contribution of the banks' rescue of Greece, as a impairment of their claims, said the leader of European finance ministers, Jean-Claude Juncker.
According to diplomatic sources, the ministers agreed to effectively negotiate with the banks at a discount of "at least 50%" against a target of 21% decided on July 21 with the banking sector.They thus de facto endorsed the conclusions of an expert report which was presented by the troika of donor funds in Greece (EU, ECB and IMF). The paper believes that a discount of 50 or 60% hope to stabilize Greece without having to increase in the amount of gigantic international loans that have already been promised.
A "discount" is the term used in relation to the financial depreciation of the value of loans taken by creditors in this case private banks and investment funds that hold government debt. A discount of 50% of the private sector, the second program of public financial support pledged July 21 to Greece, however, should be slightly revised upwards with government loans (Europe and IMF) to 114 billion euros, against 109 billion euros at the time scheduled.To maintain the envelope of 109 billion euros unchanged, it would bring the discount to 60%, according to calculations by experts.
"It is also an effort by the private sector"
In any event, the second bailout in late July, just after the first amounting to 110 billion euros agreed in spring 2010, will have to be redesigned. "It's pretty clear that we need a substantial discount on Greek debt," also said Saturday the Swedish Finance Minister Anders Borg on his arrival in Brussels for a meeting with colleagues from across the EU."We will now work on a new plan in Greek and this new plan is true that there is a substantial effort to Greece again, there is an effort by European countries and will also require an effort of the private sector" said his Belgian counterpart Didier Reynders.
The question is whether the banks that have so far dragged its feet to give the pot, will accept a negotiated settlement does not pass through a default of Greece said "messy" serious consequences. "It's a negotiation s'entame," said Didier Reynders. In return for the effort required on the Greek claims, it is intended to recapitalize European banks to the tune of nearly 100 billion euros.The subject was Saturday in the agenda of the ministerial meeting, before a meeting in the evening between French President Nicolas Sarkozy and German Chancellor Angela Merkel and the EU summit on Sunday.
ALSO READ:
"GRAPHICS – The crisis of the euro, or the history of contagion
"SPECIAL – Banks in turmoil
"Paris and Berlin are seeking a solution for banks