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French banks are ready to participate in the rescue of Greece by extending the maturity of their holdings of debt issued by that country, President Nicholas Sarkozy said Monday. A plan is being worked on between the government and French lenders to reinvest, between now and 2014, 70 percent of their holdings of Greek debt into new securities with a duration of 30 years, he said. Mr. Sarkozy said he hoped that the other European countries would adopt a similar plan. Germany had previously pushed hard to obtain a tough, compulsory private sector involvement in the Greek bailout but backed down amid opposition from France and the European Central Bank.
“We’ve been working on this with the banks and insurance companies,” Mr. Sarkozy said at a news conference in Paris. “We’re committed to going from a principal — the voluntary participation of the private sector — to concrete reality.” “If it wasn’t voluntary, it would be viewed as a default, with a huge risk of an amplification of the crisis,” he added.
In announcing the voluntary restructuring plans, Mr. Sarkozy was confirming a report earlier in the newspaper Le Figaro, which said that the banks were ready to re-invest, or roll over, much of their holdings of Greek sovereign debt.
According to Le Figaro and other French press reports, the rollover would concern 70 percent of the redemptions in 2011 and 2012. It would be split in two, with 50 percent re-invested in Greek securities with a maturity of 30 years, paying a coupon close to the current interest rate on the loans to Greece, to which a “GDP growth” link would be added as a sweetener. The other 20 percent would be invested in a separate “guarantee fund.”
The French plan was expected to be formally presented for discussion to the International Institute of Finance, which represents many of the largest global finance institutions, at a meeting of Greece’s creditors in Rome Monday. “Each country could find it interesting and it shows we won’t let Greece go and that we will defend the euro,” Mr. Sarkozy said of the French plan. “It’s in all our interest.”