Bloomberg News

Merkel Ally Meister Says Greek Writedown Push Must Be Voluntary

October 17, 2011

Oct. 17 (Bloomberg) -- Efforts to persuade banks to accept bigger writedowns on Greek bonds must remain voluntary to avoid causing turmoil in financial markets, the parliamentary finance chief of German Chancellor Angela Merkel’s party said.

“For us, the main motive is to stay in a controllable situation, not in a situation that sparks contagion,” Michael Meister, the Christian Democratic Union parliamentary finance spokesman, said today in an interview in Berlin. “If the voluntary component is removed then we could find matters spinning out of control. I believe everyone has understood this well enough.”

European officials led by Germany and France are pressing for banks to accept losses of as much as 50 percent on their Greek debt as part of a package to fight the euro-area debt crisis being prepared for a European Union summit on Oct. 23, people familiar with the discussion said last week.

While Merkel’s chief spokesman tried today to damp investor expectations of a complete fix by the Brussels summit, Finance Minister Wolfgang Schaeuble said that a 21 percent voluntary writedown agreed in July needs to renegotiated to bring down Greece’s debt level.

Euro-region governments and bank leaders, including Deutsche Bank AG Chief Executive Officer Josef Ackermann, aim to achieve an “optimized” writedown on Greek debt, Meister said. Ackermann said on Oct. 13 that getting investors to accept larger losses on Greek holdings may prove difficult.

EU leaders also aim to agree on what Schaeuble has called a more “effective use” of the European Financial Stability Facility bailout fund. While as many as seven models are in discussion to boost the fund’s strength, an “insurance” vehicle that would commit the EFSF to underwrite a fraction of euro-region debt is “conceivable,” Meister said.

“What’s decisive for us is that the German government, parliament and the taxpayer approved a certain level of risk in the EFSF,” said Meister. “What counts for us is that this level is not increased.”

--Editors: Alan Crawford, James Hertling

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Rainer Buergin in Berlin at rbuergin1@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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