French banks have agreed to roll over their holdings of Greek debt for 30 years, President Nicolas Sarkozy confirmed on Monday.
The voluntary rollover of Greek bonds maturing between now and 2013 would mean Athens would continue to borrow more money long term, and it would not be defined by ratings agencies as a default.
Sarkozy told a news conference in Paris: “The finance minister has been working very hard with the banks and insurers on what could be the private sector’s voluntary participation: a system that could probably be attractive for other countries. The idea is that we will not let Greece go down, that we will defend the euro: it’s in our common interest.”
French banks are among Europe’s most exposed to Greek debt. BNP Paribas alone has lent the Athens government five billion euros.
As well as that public debt, Societe Generale and Credit Agricole have big exposure to private loans in the country through their Greek subsidiaries.
The French approach could be a blueprint for other European banks. Euro zone sources said EU officials have been discussing it with international bankers at a gathering organised by the Institute of International Finance in Rome.
European Union 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 brand as a selective default.
A note of caution came from the head of Germany’s biggest commercial bank, Deutsche Bank, which has only a tiny holding of Greek debt.
Deutsche CEO Josef Ackermann warned against rushing a deal on private sector involvement.
“Political leaders expect a solution by the end of the week, but we should not rush it,” he said . “It is important to have a good solution. The issues are complex and need to be discussed.”
Ackermann, who is also chairman of the IIF, said that if contagion spread from a Greek default, the crisis could be bigger than after the collapse of Lehman Brothers in 2008.
Greece’s public deficit needed to be stabilised before other options were considered, and policymakers should consider creditor banks taking equity stakes as part of a bail-in solution, he said. However, Ackermann said it remained open whether any private sector solution acceptable to all would be found.