However, markets already consider the debt “haircut” insufficient and speculation has grown that a considerably higher write-down is required.
Michael Kemmer, the head of the BdB banking federation, told ARD television in Germany that the 21-percent cut was already a “massive contribution” to lowering Greece’s debt burden.
“It will not help to bring back confidence in the financial markets if we start talking about second and third measures before we have finished the first.”
Kemmer also rejected a blanket approach to bank recapitalisation in Europe, saying that officials should look at individual lenders on a case-by-case basis and see where additional cash injections were required.
But both German Finance Minister Wolfgang Schäuble and head of eurozone finance ministers Jean-Claude Juncker admitted that the amount agreed upon in July may not have been high enough. In an interview on Austrian television, Juncker suggested that 60-percent would have been a more realistic figure.
Regarding the effects a debt write-down would have on German banks, Kemmer remained positive: “Capital has increased in recent months and they are stable,” adding that they were in a position to manage a loss in debt repayments.
“German banks have learnt from the financial crisis of 2008. They improved their risk management and boosted their capital. Compared to other banks internationally, the German banks are doing well,” said Kemmer.
The European Banking Authority is conducting an audit of banks’ capital to say how much extra liquidity is needed to cover potential losses stemming from their holdings of Greek debt. Estimates from the International Monetary Fund suggest that such coverage may cost up to €200 billion ($272 billion).