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Greece's new best friend: France

Sarkozy has pledged that France “won’t let Greece fall” as he announces French banks’ support for debt-laden Greece.

Image: AP Photo/Michel Euler

FRENCH BANKS are ready to help troubled Greece by accepting a significant debt rollover, President Nicolas Sarkozy said today – a move that could push other banks to pitch in to the Europe-wide effort to keep Athens from defaulting.

French banks are among the biggest holders of Greek sovereign debt — some €15 billion — and Sarkozy urged other countries to follow suit.

Sarkozy said the plan being worked out between French treasury officials and bankers would involve reinvesting debt held by French banks in new securities over 30 years.

A report in Le Figaro newspaper says that the banks are ready to re-invest, or roll over, up to 70 per cent of the Greek sovereign debt they hold. Asked whether the report was correct, Sarkozy said “yes.”

“It’s a system that other countries could find useful,” he said of the plan.

“The idea is that we won’t let Greece fall, we will defend the euro, it’s in the interest of us all,” he told a news conference.

A Greek default would have grave consequences on all 17 countries that use the euro and rock markets worldwide. European leaders are trying to get the private sector to take part in a new rescue package under discussion for Greece.

Germany has a greater amount of Greek government debt than France. But France has a larger total amount of Greek debt because of its exposure to Greek private banks, mainly Credit Agricole’s ownership of Emporiki Bank.

The finance ministry in Germany, which has pushed hard for private creditors to contribute, said it welcomes proposals from the private sector, as in the French case.

The German government “is still in talks with financial institutes, with banks and insurers, with major private creditors, for example investment funds,” ministry spokesman Martin Kreienbaum said. He did not give details.

European countries and the IMF put together an original bailout last year for Greece. But persistently high interest rates demanded for its bonds have meant the country needs more help.

- AP

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