5th Mar 2024

European bankers mull French plan for Greek rollover

  • Roem skyline: leading international bankers met to consider the French model in Italy on Monday (Photo: Giampaolo Macorig)

European lenders are considering the 'first draft' of a plan put forward by French banks for a rollover of some 70 percent of the banks' holdings of Greek debt.

Unveiled by French President Nicholas Sarkozy on Monday (27 June), the plan would involve private bondholders agreeing to re-invest back in Greece half the amount of their holdings as they matured, swapping the debts for new longer-dated bonds.

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The maturity on the new bonds remains up for discussion, with some German sources saying the suggested extension to 30 years is too long, but the aim is to partially free the country from having to repay its debts in the near term, relieving some pressure from the insolvent nation.

A further 20 percent of debts coming due would be invested in triple-A bonds via a special purpose vehicle.

EU nations are hoping to convince private creditors to engage in such voluntary rollovers amounting to around €30 billion, representing just under a third of the amount of a potential second bail-out of the country.

The French scheme was considered alongside other options at a meeting in Rome on Monday night of some of the most powerful figures in international banking, with executives flying in to talks with eurozone and European Central Bank representatives regarding the voluntary rollover.

Organised by the Institute of International Finance, the world's global association of financial institutions, the meeting was hosted by Vittorio Grilli, the Italian Treasury chief and head of the EU Economic and Finance Committee

EU officials have confirmed that discussions on a voluntary rollover have already been taking place with Belgian, Dutch and German banks.

However, other bondholders, including pension funds and central banks would also need to be convinced of rollover plans.

Such schemes, however voluntary, may in any case provoke credit ratings agencies to declare a Greek default, as the Fitch agency announced it would do last week.

European leaders are confident that they can cobble together a plan that is sufficiently voluntary that such a "credit event" will not happen.

"They are confident, not 100 percent, but they think they can pull it off," one EU official told EUobserver.

The talks came ahead of a crucial vote in the Greek parliament on a package of €28 billion in cuts and €50 billion in public asset sell-offs. Discussion on the programme begins on Tuesday, with a vote on Wednesday. A second vote on a plan for implementing the programme will be held Thursday.

Unions launched a two-day general strike on Tuesday in opposition to the mid-term Greek plan while a number of government deputies began to wobble in public as to whether they would support the measures.

The ruling Pasok party has a slim, five-seat majority.

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