German banks agree to help Greece

Germany's financial institutions will contribute €3.2-billion to a Greek rescue, the details of which still have to be finalized, German Finance Minister Wolfgang Schaeuble said on Thursday.

"This concerns debt maturing by 2014 of about €2-billion. Added to this are German bad banks ... which we will ask to contribute, which have debt maturing of €1.2-billion, so that we expect maturities of €3.2-billion in total," Mr. Schaeuble told a news conference, stressing that that was "relatively limited".

The amount due by 2014 would be reoffered, Mr. Schaeuble said after meeting with the heads of top German financial institutions.

Euro zone policymakers are working on a second assistance package for Greece of a similar magnitude to last year's €110-billion bailout and want private bondholders' involvement to account for around €30-billion of that.

French banks and insurers have the biggest exposure among foreign holders of Greek debt. Greek banks have little choice but to roll over their holdings.

German financial institutions hold Greek bonds worth roughly €10-billion, of which about 55 per cent mature after 2020, Mr. Schaeuble said.

He also told reporters he was confident a solution would be agreed on Sunday, when euro zone finance ministers meet in Brussels. He added it was not crucial how this contribution would be reached but that it would be achieved.

"We are not completely done with the finalization. Work will be done today and tomorrow," he said.

French banks have reached an outline agreement to roll over holdings of maturing Greek bonds as part of a wider European plan to avoid sovereign default. Politicians and bankers are confident it can be adopted without triggering a default or a payout in credit insurance.

"We are convinced Greece has to be helped further," said Josef Ackermann, CEO of Germany's largest bank Deutsche Bank .

"We are taking the French draft as a basis but will build in modifications and are very confident we will find a solution that will give satisfactory answers to all participant."

There is huge political emphasis on the participation of banks and insurers being fully voluntary, in order to avoid a default scenario. Berlin insists that their contribution must be "substantial" but it has dropped proposal for a full bond swap.

Deutsche Bank's Mr. Ackermann clashed with German Chancellor Angela Merkel and Mr. Schaeuble at a conference on Wednesday, saying his bank would help Greece to "avoid the collapse of the entire system", but was not happy about it and could face writedowns.