Germany, France, Dutch to buy Greek bonds

[Cees Binkhorst]

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By REUTERS, , Updated: February 27, 2010 4:02 PM
Germany, France, Dutch to buy Greek bonds: MEP
http://money.ca.msn.com/
By Lefteris Papadimas

ATHENS (Reuters) - Germany, France and the Netherlands plan to buy Greek
bonds to help Athens cope with a severe debt crisis, a German member of
the European Parliament said on Saturday.

The comments by MEP Jorgo Chatzimarkakis on Greek television echoed
details of an aid plan that were reported by a leading Greek newspaper
on Saturday. That report was dismissed by a senior German government
official as "nonsense."

"The plan is that Germany, France and the Netherlands will buy Greek
bonds," Chatzimarkakis, a German of Greek heritage, told Mega TV in an
interview aired on Saturday evening.

"Germany is planning to buy immediately 5-7 billion euros (of bonds),"
he said, adding that Germany's state-owned development bank KfW and
France's state-owned bank Caisse des Depots were part of the deal and
would buy Greek bonds.

It was unclear how Chatzimarkakis, who is not a high-profile politician
in Germany, knew of the plan he described.

Earlier, Greek newspaper Ta Nea reported, citing unnamed banking and
official sources, that Germany and France -- it did not mention the
Netherlands -- planned to help Greece with its debt problems by buying
bonds or providing guarantees via the same state banks mentioned by
Chatzimarkakis.

The report said French President Nicolas Sarkozy had discussed the plan
by telephone with Greek Prime Minister George Papandreou.

In return for the aid, the newspaper said the Greek government had
agreed to introduce additional austerity measures worth some 4 billion
euros ($5.4 billion) to reach its target of cutting the budget deficit
by 4 percentage points this year.

The Greek finance ministry and the European Commission declined to
comment on the report, which came after signs of a diplomatic push to
resolve Greece's debt crisis. There was no immediate comment from
France's government.

But the senior German official, who declined to be named, said there was
no such agreement. "No, this report is nonsense," the official said.

Nevertheless, a German parliamentary source told Reuters that the
government was quietly preparing emergency budget provisions for
possible aid to Greece. The finance ministry denied this.

With German public opinion strongly against aiding Greece, Chancellor
Angela Merkel's government has been reluctant to offer any concrete
monetary assistance, beyond a vague pledge that it will take action "if
needed" to protect financial stability in the euro zone.

CONTINGENCY PLANS

In private, however, senior German financial officials admit contingency
plans have been drawn up in case Berlin needs to intervene in Greece's
debt crisis, which has caused turmoil in European markets and hurt
confidence in the euro currency.

Sources in Germany's ruling coalition told Reuters earlier this month
that the coalition was considering having KfW buy Greek bonds.

European Union inspectors visited Athens this week to discuss the
crisis. EU Economic Affairs Commissioner Olli Rehn plans to visit Athens
next week, and Ta Nea said Rehn would announce the aid plan for Greece
during his visit.

Papandreou said on Friday that he would visit Berlin for talks with
Merkel on March 5, while Deutsche Bank Chief Executive Josef Ackermann
met Papandreou in Athens on Friday.

Media reports in Germany and France have suggested governments in the
16-country euro zone might offer aid worth a total of 20 to 25 billion
euros to Greece. Officials have declined to comment on the size of any
aid plan.

Greece, which is preparing to tap the euro debt market with its second
bond issue this year, has said its funding needs are met until
mid-March, and it will need to refinance about 20 billion euros of debt
maturing in April and May. Markets worry that Greece may not be able to
borrow at affordable rates.

(1 euro = $1.36)

(Additional reporting by Ingrid Melander in Athens, Matthias Sobolewski
in Berlin, Astrid Wendlandt in Paris and Foo Yun Chee in Brussels;
Editing by Andrew Torchia and Noah Barkin)

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