German Banks Agree to Roll Over Greek Debt

The banks and insurance companies will commit to providing financing for a Greek aid package, Mr. Schäuble told a news conference in Berlin, according to Reuters.

The agency quoted him saying that as a minimum, the Greek debt held by German groups that matures by 2014 would be rolled over, or extended. He also said that 55 percent of Greek bonds held by German institutions would mature after 2020.

At the same event, the Deutsche Bank chief executive, Josef Ackermann, said a French proposal was being used as a basis for the German agreement, although modifications would be built into that plan.

German and French lenders are the biggest foreign holders of Greek debt. And the involvement of private creditors is seen as crucial in international agreement on a second bailout for the crippled Greek economy.

A separate hurdle was passed Wednesday after Prime Minister George A. Papandreou of Greece won the passage of a bill setting new government spending cuts and revenue-raising steps.

Mr. Schäuble said that he was confident that an agreement on the terms of a new aid deal could be fleshed among euro-area finance ministers at a meeting July 3.

Under the complex French plan, banks agreed to roll over 70 percent of their Greek bonds falling due from July 2011 to June 2014, while pocketing the remaining 30 percent for themselves. Of the amount to be rolled over, just over two-thirds would be reinvested in new Greek securities with a maturity of 30 years that paid a coupon close to the current official interest rate on the loans to Greece.

The remaining securities, just under one-third, would be invested in a separate “guarantee fund,” consisting of zero-coupon bonds with triple-A ratings.

The Deutsche Bank chief, Mr. Ackermann, was quoted as saying Wednesday by Bloomberg News that financial companies would contribute to the bailout to help avert a “meltdown.” Banks would “offer our hand in a solution,” Mr. Ackermann said.

Commerzbank’s chief executive Martin Blessing, speaking in Berlin Wednesday, said German financial institutions had reached a draft agreement on participation in a Greek rescue, although there are still “a few hitches.”

Article source: http://www.nytimes.com/2011/07/01/business/global/01iht-euro01.html?partner=rss&emc=rss