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Banks demand incentives to back Greek bailout

The Local · 21 Jun 2011, 15:30

Published: 21 Jun 2011 15:30 GMT+02:00

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"I expect all investors will participate, as long as the whole package that is being put together, and there are lots of facets to consider, looks good," said Michael Kemmer, head of the German banking federation (BdB).

"It is understandable that there will have to be incentives because at the end of the day if someone has entrusted you with money ... then you have a responsibility for this capital," he said.

Greece has debts of some €350 billion and needs a second bailout worth more than €100 billion after a €110-billion package by the European Union and the International Monetary Fund last year proved insufficient.

Eurozone finance ministers want holders of Greek bonds - primarily banks, insurers and pension funds - to take part, possibly by agreeing to a rollover, whereby investors buy new bonds to replace ones that mature.

In doing so they have to ensure that involvement by private investors is viewed as voluntary, otherwise rating agencies could declare Athens to be in default, something which could have dramatic consequences.

Kemmer said that a rollover was one of "many conceivable intelligent ideas" and that one possible incentive might be government guarantees on the bonds.

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He added that it was difficult to give the exact exposure of German banks in Greece but that it was a "manageable" €10 billion - €20 billion. The Bundesbank previously gave an estimate of some €10 billion.


The Local (news@thelocal.de)

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Your comments about this article

19:07 June 21, 2011 by lwexcel
Just so that everybody understands this in laymen terms, banks, pension funds, and insurance companies decided to invest in Greek sovereign debt. Now that these investments are about to go south, they are asking that the government (a.k.a taxpayer) step in to guarantee their irresponsible assumption of risk.

The taxpayer is being asked to provide "free" insurance against these companies bad investments and they don't even realize it. Greece is currently ranked one step above defaulting by all of the bond rating agencies, and these companies want a free guarantee for holding their debt!!!! Are you serious?
20:32 June 21, 2011 by german-guardian
After World War 1, Our people in Germany had hard times because the German currency became very low value. Right now Euro is the currency and we will protect it from falling down.We Germans are honost and hardworking. We are a true friend to Greece and a true friends helps you when you are truly in need. Even though helping might not economically make sence. Yet in the future it will help us and Europe. We must build Europe strong, and Germany at its center. During the 1200s when the mongolians wanted to invade Europe, only the unity of the Teutonic knights and the other crusades defeated the mongols. A stronger Europe garantees our people's fututre. Greece is a country with a powerful history, and it is highly culture. We want to side with the high cultured nations. When a good nation is in trouble and week, its friends help, so when that nations has recovered, it will help us and Europe.
17:51 June 22, 2011 by koll
If Europe threaten Greece to recognize North Cyprus, Greece certainly will pay every cent of her debt. 60 % of Greece land belongs to government.If Greece privatize 10 % of her lands debt problem could be solved.

If Greece defaults many European Banks will go bankrupt, whether people or companies lost their bank deposits or governments face big debt burden to bailout them.

Greeks abuse Europe by lie and now threaten to default to get more money.

If North Europeans not stand firm on greeks, Spain Italy Portugal will declare bankruptcy due to public pressure rather than paying debts.

This will bring trillions of extra burden to North Europeans.
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