Negotiators from the European Union and banks are “relatively close” to a deal to write off around half of Greece’s 350 billion euros ($A471 billion) debt pile, an EU official said on Monday.
“We’re relatively close to a deal,” said EU economic affairs commissioner Olli Rehn’s spokesman, Amadeu Altafaj.
While talks are ongoing, he underlined that the EU’s “preference” was “clearly for a voluntary approach”, but then batted away questions on whether the so-called ‘haircut’ of “at least 50 per cent” sought by eurozone finance ministers could somehow yet be made unavoidable for the banks.
A source close to the negotiations told AFP that the EU has asked banks to agree a 60-per cent write-down but that banks are so far sticking to their offer of a 40 per cent cut.
“It will probably end up somwhere in the middle,” a diplomatic source told AFP.
A negotiator for a major French bank that was a key player in negotiations for a 21-per cent cut originally agreed in July that turned out to be hugely insufficient, said “nothing has yet been decided.”
Greek stocks plunged more than 5.0 per cent in late morning trade, led by falls in the banking sector.
Pro-government Greek daily Ta Nea also warned that with a “major haircut” the Greece was “playing with fire” given there was “still the risk of both a default and that (Greek) banks would be kept out of the market due to a lack of financing.”
Greek banks hold about 44 billion euros ($A59 billion) in sovereign debt bonds, and pension funds another eight billion euros ($A10.76 billion).
Greek Prime Minister George Papandreou put detailed numbers to European Union counterparts during Sunday’s summit showing that the “immediate debt reduction” Athens would secure from a 50-per cent haircut would amount to “57.1 billion euros”, according to a government document seen by AFP.
A former Greek deputy head of the European Central Bank, Lucas Papademos, has also warned that a 50-per cent cut only equates in reality to a 20 per cent reduction given Greek state requirements to step in and aid Greek banks locked out of inter-bank markets.
A Hellenic Stability Fund would have to step in to the tune of 16.6 billion euros ($A22.34 billion), the document also said.
Papandreou last week won parliamentary approval for yet more austerity cuts on top of radical reforms to its labour market, public companies and the fight against tax fraud.
