Germany, facing pressure from lawmakers within its ruling coalition, has laid out its conditions for new aid for Greece: private banks must forego collecting Greek public debts for seven years.
In a letter sent to eurozone partners and made public on Wednesday, German Finance Minister Wolfgang Schaeuble said an agreement could be reached "through a bond swap leading to a prolongation of the outstanding Greek sovereign bonds by seven years."
Schaeuble has insisted for weeks that a second aid package being negotiated for Greece must include contributions by private investors, though without detailing what would be expected of them.
A rollover, or renewal of credits to Greece would allow for "a fair sharing of the burden between taxpayers and investors," finance ministry spokesman Martin Kreienbaum said Wednesday.
Chancellor Angela Merkel has just returned from the United States and was to speak with deputies from liberal and conservative parliamentary groups to calm heated passions and convince them to back more aid for Athens.
She is expected to assure the lawmakers that, as Schaeuble said in his letter, Germany will agree to nothing that did not include "a quantified and substantial contribution of bondholders to the support effort" for Greece.
Taxpayers in several European countries such as Austria, Finland, Germany, the Netherlands and Slovakia are firmly opposed to more aid for Greece, which is being crushed by some 350 billion euros ($500 billion) in debt.
While the German proviso may go some way towards appeasing them, it will probably not go down well in other parts of Europe.
The French position is "a refusal to restructure Greek debt," government spokesman Francois Baroin said Wednesday, something the German proposal could be seen as.
The European Central Bank in Frankfurt is also unlikely to appreciate Schaeuble's letter.
ECB president Jean-Claude Trichet said Monday he would only accept a voluntary gesture on the part of banks to reinvest money they earned on Greek bonds into more credit for the country.
Schaeuble's idea goes much further however by establishing a period long enough to fully implement necessary reforms and regain market confidence.
He specifically called for a commitment by holders of Greek bonds that goes beyond the approach summed up as the Vienna Initiative.
That was a model created during the global financial crisis that saw banks roll over credits to Hungary, Latvia and Romania, and has support from the European Commission and French authorities.
"Someone will have to give ground," Commerzbank analyst Christoph Rieger concluded.
He supposed that it would be Germany that would probably ease its demands at some point.
Berlin has already stressed the "voluntary" aspect to decisions by investors.
"We assume that private creditors are aware of their responsibilities," finance ministry spokesman Kreienbaum said.
Andreas Schmitz, head of the German federation of private banks, allowed that "an extension of the maturity of Greek bonds might be a solution."
Banks might not have a choice in any event, since the alternative could be getting hit with severe losses.
Schaeuble warned in his letter that "I see the need to agree on a new program for Greece in order to close the financing gap and prevent default," which could spell disaster for the 17-nation eurozone.