French banks have agreed to roll over holdings of Greek debt for 30 years, President Nicolas Sarkozy said on Monday, as the Greek government fought to persuade backbench rebels to back a crucial austerity plan to avert bankruptcy.
With financial markets watching the Greek crisis anxiously, Sarkozy told a news conference in Paris that the French authorities had reached an agreement with the banks on a voluntary rollover of maturing bonds. “We concluded that by stretching out the loans over 30 years, putting (interest rates) at the level of European loans, plus a premium indexed to future Greek growth, that would be a system that each country could find attractive,” he said.
Banking sources confirmed that was part of an outline deal under which banks would reinvest 70% of the proceeds when Greek bonds fall due. Of that amount, 50% would go into the new 30-year bonds and 20% would be reinvested in a zero-coupon guaranteed fund based on high-quality securities.
European Union officials were discussing the French idea with international bankers and the Institute of International Finance in Rome, sources said, and German banks voiced interest in the “French model”.
Any new financial rescue for Athens, including official lending and private sector participation, depends on the Greek parliament approving this week a five-year austerity plan and legislation to implement structural reforms and privatisations.
Greek finance minister Evangelos Venizelos met ruling socialist party (PASOK) rebels in Athens to push them to toe the line in parliamentary votes on Wednesday and Thursday, where a parliamentary debate has begun on Monday.
Without parliamentary approval, the European Union and IMF say they will not release the fifth tranche of the €110 billion bailout agreed last year.