July 19, 2011
A tax on euro zone banks and cheaper, longer-dated official loans are the least risky way to provide extra funding for debt-stricken Greece, a confidential paper drafted ahead of a European summit showed on Tuesday.
With financial markets on edge two days before leaders of the 17-nation currency area hold a crucial meeting, other options that could trigger a selective or outright Greek default with far-reaching consequences remain on the table, the paper obtained by Reuters showed.
The European currency is facing the biggest crisis of its 12-year existence, with contagion threatening major economies such as Italy and Spain after three small members -- Greece, Ireland and Portugal -- needed financial rescues.
Euro zone leaders will try to agree on a second rescue package for Greece and a strategy to halt contagion when they meet in Brussels on Thursday, after senior officials thrash out detailed proposals in talks on Wednesday.
French European Affairs Minister Jean Leonetti confirmed late on Monday that euro zone officials were eyeing a bank tax to raise extra money to help Greece, which needs a further 115 billion euros in funding by mid-2014 on top of a 110-billion-euro EU/IMF bailout agreed last year.
"It's one of the solutions we are looking at. It would have the advantage of not making us intervene directly with the banks and therefore potentially not triggering a default," he told reporters in Brussels.
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