Private Sector Greek Debt Talks Gain Momentum, Led By Germany
June 22 2011 - 10:57AM
Dow Jones News
A plan to extend Greek bond maturities with the support of
private sector creditors gained momentum Wednesday as the German
finance ministry, banking sources and a major financial industry
lobby said they were initiating talks on how to carry out a
voluntary rollover on Greek debt.
The German Finance Ministry will host a meeting with major
German banks and insurers like Deutsche Bank AG (DB), Commerzbank
AG (CBK.XE) and Allianz SE (AZ) Wednesday to discuss how a
voluntary debt rollover by bondholders could shape up, several
banking sources familiar with the matter said, adding that a plan
wouldn't be finalized Wednesday.
German banks have the highest exposure to Greek sovereign debt,
worth around $22.7 billion, according to figures released in early
June by the Bank of International Settlements.
A spokesman for the German finance ministry wouldn't comment on
the reported meeting, but said the ministry is "trying hard to get
into talks with the private sector on a national and international
level to see how we can quantify participation," before a July 3
meeting between euro zone finance ministers.
The Dutch government has started similar discussions with local
financial institutions, another person familiar with the matter
said Wednesday.
Euro-zone politicians want Greek government debt bondholders to
make a contribution to a new funding package for the country by
using the money they receive from maturing bonds to buy new bonds
on roughly the same terms.
Securing private sector support for a rollover has emerged as a
vital next step in alleviating Greece's immediate debt woes, after
Germany and France agreed last week to involve private sector
creditors in further aid measures and Greece's parliament signed
off late Tuesday on a new round of budget cuts.
The Institute of International Finance, a lobby representing
more than 400 financial institutions around the world, has also
entered discussions with the Greek government, other international
public authorities and its own membership about Greece's debt
problems, but only on an "informal" basis, according to a
spokesman.
German daily Handelsblatt Tuesday reported that euro-zone policy
makers had asked the IIF to review possibilities for a rollover of
Greece's sovereign bonds.
The IIF stressed Wednesday that the discussions to date haven't
involved a formal, policy-making role for the trade group, although
IIF managing director Charles Dallara is currently in Greece to
assist with the situation.
Roughly half of the IIF's members are based in Europe, including
a number of institutions that have significant holdings of Greek
government bonds. The IIF is chaired by Deutsche Bank AG's (DB)
Chief Executive Josef Ackermann.
Deutsche Bank, which is Germany's largest listed lender, had a
total net exposure of EUR1.6 billion at the end of 2010.
Major European banks, insurers and institutional investors are
also holding talks with credit ratings agencies, who could still
derail the plan if they decide it qualifies as a default
scenario.
A so-called "credit event", or default, declared by the ratings
agencies would cut Greek banks off from vital European Central Bank
funding and spark a local banking crisis with spillover effect for
broader financial markets.
Fitch Ratings warned again Tuesday that even a voluntary
extension on debt maturities could qualify as a default scenario
for Greece.
But economists and bank analysts expect its still possible to
reach an agreement with the ratings agencies that avoids triggering
a default. "We assume that there is some room for manoeuvre for a
compromise," BNP Paribas economists wrote Wednesday in a research
report.
By William Launder, Dow Jones Newswires; +49(0)6929725515;
william.launder@dowjones.com
(Paul Hannon, Eyk Henning, Joern Rehren, Bernd Radowitz and Anna
van der Meulen contributed to this article.)