Financial Times
July 18, 2011
European leaders are looking at ways to keep Greek banks afloat as part of a new €115bn bail-out plan for Athens, amid European Central Bank warnings that it may no longer be able to lend money to Greek financial institutions if the country’s bonds are in default.
The plans could add as much as €20bn to an increasingly costly bail-out plan, according to estimates by the European Commission, but the size would likely depend on how long Greek banks were cut off from ECB financing.
A temporary default could be declared as early as this week, forcing officials to come up quickly with a bank support plan. European negotiators are locked in intensive negotiations to secure a bail-out deal in time for an emergency eurozone summit on Thursday.
The main hurdle continues to be German and Dutch insistence that the bail-out be funded, in part, by contributions from private bondholders – plans which rating agencies have warned would lead them to declare at least some Greek bonds in default.
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