Eurozone finance ministers were locked in crisis talks Tuesday in an attempt to address criticism from the European Central Bank (ECB) over plans to make private lenders contribute to a second rescue package for Greece, dpa reported
Ministers will "run through all the options today," Luxembourg's Prime Minister Jean-Claude Juncker said before the meeting, speaking as the president of the Eurogroup, the panel of eurozone finance ministers.
Under pressure from bailout-weary voters, Northern European countries like Germany and Finland have insisted that private lenders should pay for some of the cost of any new loan for Greece, which is again on the brink of bankruptcy.
"Some sort of private sector involvement is crucial in this very moment," Finnish Prime Minister-designate Jyrki Katainen said in Brussels.
But ECB officials insist any private contribution has to be truly "voluntary," warning against forcing even a partial default on Greek debt and threatening to withdraw support for Greek private banks if politicians decline to heed their warnings.
Italian central banker and ECB President-designate Mario Draghi told a European Parliament confirmation hearing that he shares the ECB's position of not being "in favour of restructuring or haircuts."
Haircuts can be seen as a form of partial default, as they involve a reduced or deferred repayment on maturing bonds. EU officials have talked of the so-called "Vienna Initiative" as a compromise solution that would address the ECB's concerns.
The 2009 plan saw Western European banks agree voluntarily to continue funding their subsidiaries in Eastern Europe. In Greece's case, it would mean that they would refrain from cashing in on maturing bonds, instead accepting new sovereign debt issuances.
"We have to convince the banks, the pension funds and the insurance companies to ... keep financing Greece," Belgium's acting Finance Minister Didier Reynders said.
"The financial sector has all the interest to see the eurozone overcoming this situation without too much difficulty," Reynders said, when questioned why private lenders should accept calls to keep their purses open.
German Finance Minister Wolfgang Schaeuble, who last week suggested the alternative of making banks accept an extension of debt repayments on their Greek bonds, said the "details" of private sector involvement still needed to be worked out.
Greece is thought to need an extra 80-120 billion euros to keep it solvent beyond 2012, on top of the 110-billion-euro (159-billion-dollar), three-year loan it received last year from the European Union and the International Monetary Fund (IMF).
In return for the money, the Greek government has committed to another round of radical budget trimming, including accelerating a 50-billion-euro privatization plan.
The debt rescheduling agreement with the private sector could cover around one quarter of the money required for the new Greek aid plan. The EU would finance two thirds of the remaining amount, leaving the IMF to provide the rest.
The IMF has insisted on a deal being found on the new Greek loans as a precondition for continuing to fund the existing bailout package for the country, which should see it receive a 12-billion-euro payment next month to avoid default.
Juncker, indicating that no decision was expected Tuesday, said the aim of the Brussels talks was to get "as close as possible to a deal," which should be secured at the Eurogroup's next meeting in Luxembourg, on June 20