French banks ready for big Greek debt rollover (AP)

PARIS – French banks are ready to help troubled Greece by accepting a significant debt rollover, President Nicolas Sarkozy said Monday, a move that could push other banks to pitch in to the Europe-wide effort to keep Athens from defaulting.

Sarkozy said the plan would see banks reinvest their Greek debt holdings into new bonds over 30 years. That would give Greece valuable funding to manage its huge debt load and buy it time to reform its economy.

French banks are among the biggest holders of Greek sovereign debt — some euro15 billion ($21 billion)_ with Germany's financial sector also heavily exposed, to the tune of euro22.7 billion.

Sarkozy urged others to follow the example of the French plan, which was presented Monday at an international meeting in Rome where banks and financial institutions discussed what the private sector can do to save Greece from default.

The closed-door meeting was organized by the International Institute of Finance and the director-general of the Italian Treasury Ministry, Vittorio Grilli, in his role as president of the eurozone economic financial committee. It ended without a statement.

The LaPresse news agency, without disclosing its sources, said there was "consensus" on renegotiating Greek debt along the lines suggested by French President Nicolas Sarkozy.

A spokesperson for the Treasury Ministry, speaking on the usual ground rule of anonymity, said "no decisions, either formal or informal, were taken. It was just an exchange of views today."

A report in Le Figaro newspaper says that the banks are ready to re-invest, or roll over, up to 70 percent of the Greek sovereign debt they hold. Asked whether the report was correct, Sarkozy said "yes."

"It's a system that other countries could find useful," he said of the plan.

"The idea is that we won't let Greece fall, we will defend the euro, it's in the interest of us all," he told a news conference.

The proposed plan would have the benefit for banks of avoiding a complete rollover of their Greek debt, which is another idea that has been mooted in Brussels in recent days.

According to Le Figaro, half of banks' Greek government debt would be reinvested in new securities with a much longer maturity of 30 years. Another 20 percent would be invested in a "zero coupon" bond, the interest on which would be re-invested in high quality government bonds to provide participating banks a guarantee for their Greek investment.

That would alleviate another stumbling block to finding a Greek solution — Germany's resistance to giving private creditors a European guarantee for their loans to Greece.

A Greek default would have grave consequences on all 17 countries that use the euro and rock markets worldwide. European leaders are trying to get the private sector to take part in a new rescue package under discussion for Greece.

Germany has a greater amount of Greek government debt than France. But France has a larger total amount of Greek debt because of its exposure to Greek private banks, mainly Credit Agricole's ownership of Emporiki Bank.

The finance ministry in Germany, which has pushed hard for private creditors to contribute, said it welcomes proposals from the private sector, as in the French case.

The German government "is still in talks with financial institutes, with banks and insurers, with major private creditors, for example investment funds," ministry spokesman Martin Kreienbaum said. He did not give details.

European countries and the International Monetary Fund put together an original bailout last year for Greece. But persistently high interest rates demanded for its bonds have meant the country needs more help.

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Cecile Brisson in Paris, Geir Moulson in Berlin and Victor Simpson in Rome contributed to this report.

Sarkozy says banks accept Greek debt rollover (Reuters)

ATHENS/PARIS (Reuters) – 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 percent of the proceeds when Greek bonds fall due. Of that amount, 50 percent would go into the new 30-year bonds and 20 percent 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 (IIF) in Rome on Monday, euro zone 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 privatizations.

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 defeat could plunge the country into default.

Greece's conservative opposition has rejected calls for national unity, forcing Prime Minister George Papandreou to rely on his slim parliamentary majority to push through a painful mix of spending cuts, tax hikes and state selloffs.

However with Greece stuck in deep recession, at least three PASOK deputies have expressed serious reservations or outright opposition to a plan they say will crush any hope of growth for years to come and it is unclear how the numbers will play out.

Without parliamentary approval for the measures, which have caused a wave of strikes and demonstrations, the European Union and International Monetary Fund say they will not release the fifth tranche of the 110 billion-euro bailout agreed last year.

If the 12 billion-euro tranche is not forthcoming, the Greek government, which has been shut out of financial markets because of the ruined state of its public finances, will run out of money within weeks, probably triggering a Europe-wide crisis.

PREPARATIONS

Venizelos was due to meet wavering deputies throughout Monday in a last-ditch bid to ensure the votes pass after German ministers warned that Europe had to make plans for the event of a defeat which would block the next tranche of aid.

"(Rejection) isn't Plan A, or the most likely outcome but the euro zone and its financial sectors need to make preparations," Deputy Finance Minister Joerg Asmussen told a conference on Monday.

In a sign of growing nervousness on financial markets, the premium investors demand to hold Greek debt rather than benchmark German bonds widened by 20 basis points on Monday to 1,432 basis points.

The debate in parliament is due to begin on Monday evening with an initial vote on the framework austerity package due on Wednesday, and lawmakers then voting on Thursday on a separate bill containing specific steps to implement it.

Defections over the past 13 months have cut Papandreou's support in the 300-member parliament to 155 seats, meaning a handful of votes could decide the issue, which may be further complicated if one bill passes and the other does not.

In an interview with Spanish daily El Mundo on Sunday, Deputy Prime Minister Theodore Pangalos said he believed the first vote would pass but he was less confident about the second implementation bill.

"That's where we may have problems," he said. "I don't know whether some of our legislators will vote against it."

BAILOUT INSUFFICIENT

With the current 110 billion bailout insufficient to keep Greece going, European leaders are working on a further package of a similar size including a contribution from private banks which would agree to a "voluntary" rollover of their Greek debt.

Whether such a deal will be enough to stave off problems in the longer term remains uncertain. Many investors and economists believe that even if the austerity package is passed this week, it will merely delay an inevitable restructuring or default.

With the fate of both the existing aid plan and the new package dependent on this week's vote, major rallies are planned by the protestors who have been occupying Syntagma Square outside the Greek parliament in Athens for the past month.

Public anger has been fueled by Greece's worst recession since the 1970s, a youth unemployment rate of more than 40 percent and public finances that have been shattered by a debt equivalent to some 150 percent of gross domestic product.

The powerful public sector union ADEDY and its private sector equivalent GSEE are due to hold a 48-hour strike on June 28 and 29, that will hit public transport, telecoms, the post office and many hospitals.

Many companies, including the main electricity group PPC which is slated for partial privatization next year, have already started rolling stoppages.

On Monday, protestors hung a huge banner off the Acropolis, the ancient rock outcrop which dominates Athens, proclaiming: "People have the power, they never surrender."

(Writing by James Mackenzie, editing by Paul Taylor)