Green light to a debt rollover
French banks willing to help avert a Greek default, reinvesting bonds held in new securities over 30 years
French President Nicolas Sarkozy said yesterday that some of the country’s banks, including BNP Paribas, are willing to partly rollover maturing Greek government bonds in a bid to avoid a default by the country.
Under the proposal discussed in recent days between the French Banking Federation and the French Treasury, bondholders would reinvest about 70 percent of Greek sovereign debt maturing from mid-2011 to mid-2014, said one of the people directly involved with the talks, Bloomberg reported yesterday.
French banks are among the biggest holders of Greek sovereign debt – some 15 billion euros.
Sarkozy said the plan being worked out between French Treasury officials and bankers would involve reinvesting debt held by French banks in new securities over 30 years.
He urged others to follow the example of the French plan, which was presented yesterday at an international meeting in Rome where banks and financial institutions discussed what the private sector can do to save Greece from default.
A report in Le Figaro newspaper says that the banks are ready to reinvest, or rollover, 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.
Fifty percent of the redemptions would go into 30-year Greek securities, with the re- maining 20 percent invested in a fund made of “very high quality” securities that would back the 30-year bonds, according to a source. The proposal may be altered, he said.
European governments are seeking to persuade the region’s banks to voluntarily participate in Greece’s second bailout to make the country’s debt burden more sustainable.
European banks held about $52 billion of Greek sovereign debt at the end of last year, with French banks owning $15 billion, the second-largest position after German banks, which owned $22 billion.