Banks called on to help with aid

Germany, France and the Netherlands have launched talks with the private sector on encouraging financial institutions to participate on a voluntary basis in a second Greece bailout.

?One is trying at the national and international levels to get into talks with the private sector in order to make the voluntary contribution by the private sector quantifiable,? German Finance Ministry spokesman Martin Kotthaus told reporters in Berlin. ?The target date is July 3.?

Asked if some form of compulsion was being held out as encouragement, Kotthaus said that the stability of Greece and the euro region should be ?enough? of an incentive for the private sector to participate.

According to sources cited by Reuters on Wednesday, the Dutch Ministry of Finance was also in talks with the country?s banks, insurers and pension funds about the extension of debt to Greece.

Separately, the French insurers? association FFSA said its head, Bernard Spitz, had been summoned to the Finance Ministry in Paris yesterday to discuss the Greek debt situation.

Eurozone governments are discussing a second bailout package for Greece that would run from 2011 to 2014 and could amount to 120 billion euros, including up to 30 billion euros from the private sector.

But there is rising pressure in countries like Germany, Finland and the Netherlands for aggressive steps to force banks to share the burden of a new aid package, after taxpayers coughed up all of the money in the previous round.

Any suggestion that governments are forcing the banks to pay could be viewed by credit rating agencies as effectively a Greek default or restructuring, however. That could trigger further catastrophic debt downgrades.

German Chancellor Angela Merkel last week softened her tough position on the banks in a meeting with French President Nicolas Sarkozy, and the two agreed that any private sector support should be purely voluntary.

On Wednesday, Merkel said a bondholder contribution to a second aid package for Greece was ?always meant to be voluntary,? and that even that step was too much for many euro-area governments.

Encouraging private investors to participate in a debt rollover only ever had minority support among euro-region countries, Merkel said in evidence to a public hearing of the parliament?s European Affairs Committee in Berlin on Wednesday.

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