French banks agree Greek debt rollover
FRENCH banks have agreed to a rollover of Greek debt, giving the country some valuable breathing space as it thrashes out a plan to handle a second bailout.
At least 20 senior bankers from a group of French banks exposed to Greek debt, including BNP Paribas, Credit Agricole and Societe Generale, yesterday agreed plans to let the majority of Greek bonds maturing in 2011-14 stand for an extra 30 years, in exchange for guarantees.
The controversial deal allows the banks to shift the Greek debt off their balance sheet.
Some estimates put the level of privately-held debt covered by the deal at upwards of €30bn (£26.9bn) – a mere dent in the country’s unwieldy public debt pile, but a valuable concession for the state and a potential precedent for other banks holding Greek gilts.
A French government source called the scheme “a sort of private Brady bond without a public guarantee”, in a reference to a 1989 swap of Latin American debt for tradeable securities, some of them guaranteed, proposed by then US Treasury secretary Nicholas Brady.
The French deal could be followed by other private groups holding Greek sovereign debt. The Association of German Public Banks said in a statement: “We are looking at the French model with great interest.”
The Greek parliament is due to hold crucial votes on Wednesday and Thursday on a new five-year austerity plan and legislation to implement structural reforms and privatisations vital for the EU and IMF to continue funding for Greece.
FAST FACTS | THE FRENCH DEAL
● Under the deal, the banks can shift Greek debt off their balance sheets into a special purpose vehicle
● The banks will reinvest 70 per cent of the bonds that mature between now and 2014 into more Greek debt, giving the country a degree of certainty.