Arab Today, arab today eu \relatively close\ to bank deal on greece debt
Last Updated : GMT 13:29:47
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EU \'relatively close\' to bank deal on Greece debt

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Arab Today, arab today EU \'relatively close\' to bank deal on Greece debt

Brussels - AFP

Negotiators from the European Union and banks are \"relatively close\" to a deal to write off around half of Greece\'s 350-billion-euro 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 percent\" 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-percent write-down, but that banks are so far sticking to their offer of a 40-percent 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-percent 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 percent 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 in sovereign debt bonds, and pension funds another eight 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-percent 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-percent cut only equates in reality to a 20-percent 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, 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.  

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