UPDATE: German Banks Agree To Participate In New Greek Aid
01 July 2011 - 1:01AM
Dow Jones News
Germany's major banks have agreed to take part in a new aid
program for Greece by accepting longer maturities on some EUR2
billion in bonds that currently fall due in 2014, Finance Minister
Wolfgang Schaeuble said Thursday.
Speaking to reporters alongside Deutsche Bank AG Chief Executive
Josef Ackermann, Schaeuble said the agreement also covers an
additional EUR1.2 billion in bonds set to mature in 2014 held by
"bank banks," government vehicles set up during the global
financial crisis to take troubled assets off the balance sheets of
banks.
Overall, he said, German banks hold some EUR10 billion in Greek
government bonds, but about 55% of them aren't due to mature until
after 2020.
"The portion that will mature in 2014 is relatively limited,"
Schaeuble said. "In total we're talking about a sum of EUR3.2
billion," Schaeuble said.
Schaeuble said the agreement, based on a similar proposal put
forward in France, would help euro-zone finance ministers determine
the broad outlines of a new aid package for Greece. The so-called
Eurogroup meets Sunday in Brussels.
Ackermann said he recognizes that banks and euro-zone
governments need to cooperate on a "quantifiable, sustainable
solution" to Greece's persistent debt woes.
"We are certain that Greece needs to be helped with further
aid," he said. "Certainly the French plan was a basis," for the
agreement reached Thursday, he added.
Under the French proposal, holders of maturing bonds would agree
to reinvest half the proceeds in 30-year Greek bonds, with a base
interest rate of 5.5% that would rise if Greece's economy grows, a
person familiar with the proposal said. The ceiling interest rate
would be 8%.
Greece received a EUR110 billion bailout from its euro-zone
partners and the International Monetary Fund in 2010, the
government's public finances remain in disarray and recent deficit
projections and economic growth figures have both been worse than
that program anticipated. The Greek parliament on Wednesday
approved a broad slate of aggressive economic reforms that
euro-zone leaders and the IMF had presented as a condition for a
new aid program.
-By Patrick McGroarty, Dow Jones Newswires, +49 30 2888
4128;
patrick.mcgroarty@dowjones.com