Sept. 28 (Bloomberg) -- German banks are resisting political pressure for them to accept larger writedowns on their holdings of Greek government debt as European policy makers struggle to avert a default, a person briefed on the talks said.
German lawmakers have called on lenders in recent days to accept a larger writedown than the 21 percent proposed by the Institute of International Finance, an industry lobby group, said the person, who declined to be identified because the talks are private. Banks are concerned the IIF agreement may unravel if they are forced to accept further losses, the person said.
The IIF proposed in July that banks participate in a bond exchange and debt buyback program under which they would accept voluntary losses on the debt. Greece now needs creditors to write down the debt by at least 50 percent, former European Central Bank Chief Economist Otmar Issing said in an interview with Stern magazine distributed by the OTS news service today.
“It is not feasible to reopen the agreement,” Josef Ackermann, chairman of the IIF and chief executive officer of Deutsche Bank AG, said in a Sept. 25 speech to the Washington- based lobby group. “We should focus now on its timely and resolute implementation.”
Germany’s biggest lenders and insurers had about 17.5 billion euros ($24 billion) of exposure to Greek government debt at the end of June, according to data compiled by Bloomberg.
--With assistance from Niklas Magnusson in Hamburg. Editors: Edward Evans, Francis Harris.
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