BRUSSELS - The European finance ministers said on Saturday they were close to an agreement to strengthen their capital reserves for troubled banks - the first part of a package of measures to stem the debt crisis s 'European worse.
On the second day of talks here, ministers also said that the Greek bondholders would suffer losses far larger than the original 21 percent agreed to in July, but a bank official said that despite the consensus of Ministers, no agreement was close on radiation that could reach up to 60 percent.
Ministers also noted that France and Germany had made progress on a third question, how to increase the firepower of a rescue fund for the euro area. German Chancellor Angela Merkel and French President Nicolas Sarkozy with other European leaders continued to negotiate later Saturday.
"I think now we have reached a point of more realistic view of the situation in Greece and we will provide the means necessary to be able to protect the euro," Merkel said on arrival at a gathering center -right European leaders outside Brussels. Sunday's meeting would not be the final decision, she said, adding that leaders do not take final action at another meeting scheduled for Wednesday.
Despite resistance from Spain and Italy, an agreement seemed near on a plan worth about 100 billion euros, or $ 138 billion to recapitalize banks in Europe. The measure is intended to help banks better withstand market turbulence.
"We have laid the groundwork for an agreement on the banking sector," said Anders Borg, Minister of Finance of Sweden.
Negotiations on Saturday set a tone improved during the last week, when the differences between Merkel and Sarkozy broke into the open.
But the challenge remains for leaders to build a comprehensive and credible actions of Wednesday's meeting.
Ministers were on track to ask the bankers to write off almost half of the value of their holdings of Greek bonds after a report by international lenders suggested that the Greek economy had deteriorated so significant so that the cut of 60 percent was required.
"We agreed yesterday that we need a significant increase in the contribution of banks", "Jean-Claude Juncker of Luxembourg, who is the head of the Eurogroup of finance ministers said Saturday. He did not offer a precise figure.
But Charles Dallara, managing director of the Institute of International Finance, which negotiated on behalf of banks, said the two sides were "far from an agreement," The Associated Press reported.
One concern that remains is that Greece shows few signs of a return to economic growth and, if he refused to say how many losses the banks would be willing to accept, Mr. Dallara added, "We would be open to an approach that requires extra effort from everyone. "
Greece deteriorating economic outlook has been the subject of intense discussions between ministers with Germany and the Netherlands by pressing their case that private investors need to make bigger losses.
According to the report of the international lenders, "a loss of 60 percent for bond holders would be required to reduce the debt of Greece below 110 percent of gross domestic product in 2020. This represents a huge increase of 21 per percent of losses of private investors have agreed to accept only three months ago.
Without action, the funding needs of Greece could amount to about € 252 000 000 000 2020, says the document, while in a worse outlook, needs, including rollover of existing debt, could approaching € 450 000 000 000. The complete package is emerging very complex and involves difficult negotiations on issues that are often linked. For example, the agreement to strengthen the European banks is considered vital to protect banks against the impact of impairments on Greek bonds.
The ministers agreed Friday to release the majority of loans worth 8 billion euros to prevent Greece from defaulting. The International Monetary Fund could contribute to about 2 billion euros to the fund.
The biggest area of difference between France and Germany seems to be reduced after France appeared to give ground on how to strengthen the euro rescue fund.
Merkel has strongly opposed the suggestion that the French funds, the European Financial Stability Fund, must obtain a banking license, allowing it to borrow from the European Central Bank.
France's finance minister, Baroin, said Friday that the issue was not "a final point of discussion for us," adding that "what matters is what works."
Saturday, the Dutch Minister of Finance, Jan Kees de Jager said that the use of the central bank was "no longer an option," but that two options were being considered.
Both options involve plans to guard against some of the losses on bonds Italian or Spanish. A version of this insurance is offered by the bailout fund.
The other would form an agency to buy bonds, may attract new investors such as sovereign wealth funds. It would buy bonds on the primary and secondary markets using the insurance offered by the rescue fund, said an official informed discussions but not authorized to speak publicly.
One advantage of this plan could force it could be clearer conditions for the reform of the countries whose bonds are purchased.
On the second day of talks here, ministers also said that the Greek bondholders would suffer losses far larger than the original 21 percent agreed to in July, but a bank official said that despite the consensus of Ministers, no agreement was close on radiation that could reach up to 60 percent.
Ministers also noted that France and Germany had made progress on a third question, how to increase the firepower of a rescue fund for the euro area. German Chancellor Angela Merkel and French President Nicolas Sarkozy with other European leaders continued to negotiate later Saturday.
"I think now we have reached a point of more realistic view of the situation in Greece and we will provide the means necessary to be able to protect the euro," Merkel said on arrival at a gathering center -right European leaders outside Brussels. Sunday's meeting would not be the final decision, she said, adding that leaders do not take final action at another meeting scheduled for Wednesday.
Despite resistance from Spain and Italy, an agreement seemed near on a plan worth about 100 billion euros, or $ 138 billion to recapitalize banks in Europe. The measure is intended to help banks better withstand market turbulence.
"We have laid the groundwork for an agreement on the banking sector," said Anders Borg, Minister of Finance of Sweden.
Negotiations on Saturday set a tone improved during the last week, when the differences between Merkel and Sarkozy broke into the open.
But the challenge remains for leaders to build a comprehensive and credible actions of Wednesday's meeting.
Ministers were on track to ask the bankers to write off almost half of the value of their holdings of Greek bonds after a report by international lenders suggested that the Greek economy had deteriorated so significant so that the cut of 60 percent was required.
"We agreed yesterday that we need a significant increase in the contribution of banks", "Jean-Claude Juncker of Luxembourg, who is the head of the Eurogroup of finance ministers said Saturday. He did not offer a precise figure.
But Charles Dallara, managing director of the Institute of International Finance, which negotiated on behalf of banks, said the two sides were "far from an agreement," The Associated Press reported.
One concern that remains is that Greece shows few signs of a return to economic growth and, if he refused to say how many losses the banks would be willing to accept, Mr. Dallara added, "We would be open to an approach that requires extra effort from everyone. "
Greece deteriorating economic outlook has been the subject of intense discussions between ministers with Germany and the Netherlands by pressing their case that private investors need to make bigger losses.
According to the report of the international lenders, "a loss of 60 percent for bond holders would be required to reduce the debt of Greece below 110 percent of gross domestic product in 2020. This represents a huge increase of 21 per percent of losses of private investors have agreed to accept only three months ago.
Without action, the funding needs of Greece could amount to about € 252 000 000 000 2020, says the document, while in a worse outlook, needs, including rollover of existing debt, could approaching € 450 000 000 000. The complete package is emerging very complex and involves difficult negotiations on issues that are often linked. For example, the agreement to strengthen the European banks is considered vital to protect banks against the impact of impairments on Greek bonds.
The ministers agreed Friday to release the majority of loans worth 8 billion euros to prevent Greece from defaulting. The International Monetary Fund could contribute to about 2 billion euros to the fund.
The biggest area of difference between France and Germany seems to be reduced after France appeared to give ground on how to strengthen the euro rescue fund.
Merkel has strongly opposed the suggestion that the French funds, the European Financial Stability Fund, must obtain a banking license, allowing it to borrow from the European Central Bank.
France's finance minister, Baroin, said Friday that the issue was not "a final point of discussion for us," adding that "what matters is what works."
Saturday, the Dutch Minister of Finance, Jan Kees de Jager said that the use of the central bank was "no longer an option," but that two options were being considered.
Both options involve plans to guard against some of the losses on bonds Italian or Spanish. A version of this insurance is offered by the bailout fund.
The other would form an agency to buy bonds, may attract new investors such as sovereign wealth funds. It would buy bonds on the primary and secondary markets using the insurance offered by the rescue fund, said an official informed discussions but not authorized to speak publicly.
One advantage of this plan could force it could be clearer conditions for the reform of the countries whose bonds are purchased.
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