Banks should carry part of the debt burden, Greek Prime Minister George Papandreou said on social network Twitter on Wednesday, amid rumors of a coming "haircut" of the Greek state debt ahead of a crucial EU summit aiming to solve the crisis in the eurozone.
"All should bear a part of the burden, including banks," wrote the Greek prime minister, stressing that the main target for Greece in coming hours is to ease the current heavy burden from the shoulders of Greek citizens in a secure way.
The statement was made as European leaders gathered in Brussels for a second time in four days to negotiate a probable 50 percent "haircut" on Greek state bonds as part of an updated plan to effectively address the Greek debt crisis before spilling across Europe.
Local report had that Greek Deputy Prime Minister and Finance Minister Evangelos Venizelos presented to Greek bankers this week a plan to safeguard the sustainability of the Greek state debt that envisages the exchange of current Greek bonds held by private holders with new devalued bonds, along some cash.
According to sources, private bondholders could get some 35 euros (48.4 U.S. dollars) in new 30-year bonds and 15 euros (20.75 dollars) in cash for every 100 euros (138.3 dollars) of Greek debt the currently hold under the 50 percent "haircut" scenario.
The plan would apply to some 200 billion euros (276.6 billion dollars) currently in the hands of private investors out of a total 360 billion euros (498.3 billion dollars) Greek debt that accounts to some 140 percent of GDP.
However, the multi-billion-euro bailout loans granted to the debt-ridden country were not included, along with the bonds held by the European Central Bank.
Compared to the agreement hammered at the eurozone summit in July that opened the way for a second rescue package and an initial 21 percent "haircut", private investors who will participate on a voluntary basis in the new plan will not receive guarantees from the European Financial Stability Facility (EFSF) for the new Greek state bonds.
Regarding losses for Greece, as ailing Greek banks and social security funds hold above 50 billion euros (69.2 billion dollars) of Greek bonds, Greek officials have repeatedly stressed that in any case of losses due to restructuring of the Greek debt, there will be a safety net provided with measures to protect the sector, such as recapitalization.
The deposits in Greek banks are safe, Panagiotis Thomopoulos, head of the Greek Bank Stability Fund, stressed on Wednesday.
But local analysts expressed anxiety, noting that following some billion-euro worth additional measures needed to counter the repercussions of the "haircut", the eventual benefit for Greece would be reduced to some tens of billion euros.
On the contrary, the potential blow on the Greek and European economy could be enormous if the "haircut" would be considered as a credit event, they warned.