Greek debt write-down must be higher

BERLIN: Greece's debt crisis cannot be solved without a debt write-down which will most likely exceed that agreed this summer, German Finance Minister Wolfgang Schaeuble said on Sunday, adding that he hoped Europe's banks would work with governments on a plan.

In July European banks agreed to a voluntary write-down of 21 percent on their Greek debt.

Asked in an interview with broadcaster ARD whether there could be a Greek debt write-down of as much as 50-60 percent, Schaeuble said: "A lasting solution for Greece is not possible without a debt write-down, and this will likely have to be higher than that considered in the summer."

Germany and France have said they will present a crisis resolution plan in time for a summit of European Union leaders in Brussels on Oct. 23.

"The details are being discussed now. They don't all have to be ready by the EU summit but the principles must be clear," Schaeuble said.

"Of course we would like, if possible, to agree [private sector participation] together with the banks.

But it is clear, there must be a level of participation which is enough to bring about a lasting solution for Greece. That is enormously difficult."

In a separate interview with broadcaster ZDF, Schaeuble reiterated the need for banks to be recapitalised in order to prevent an escalation of the crisis.

"We need better regulation and we also need a better capitalisation of banks, which is what we are doing in the short-term. Not everyone will like it, but it is the best way to ensure that we don't have an escalation in the crisis due to a collapse in the banking system."

"We must fight the danger of contagion. We simply have to recognise that banks don't trust each other at the moment, which is why the interbank market doesn't function as it should. The best means to tackle this is better capitalisation," he added.

Copyright Reuters, 2011