Merkel dashes summit expectations

BRUSSELS – Amid serious disagreements, eurozone member states are trying to arrive at a solution for Greece?s public debt that would give the Greek people a breather while easing an already-raging confidence crisis.

On Tuesday German Chancellor Angela Merkel dashed hopes that Thursday?s summit on Greece would yield a quick and comprehensive solution for dealing with the debt crisis. Those who promise such a quick solution are either careless or have lost patience, she said, adding, ?Either way, that is not good.?

There won?t be anything as ?spectacular? as a restructuring of Greece?s debt or an agreement on Eurobonds at the eurozone summit in Brussels, Merkel said.

Instead, the chancellor stated, the summit must yield an agreement on a ?controlled process of successive steps… aiming at finally getting to the cause of the problem: the issue of reducing Greece?s debt and the issue of raising its competitiveness.?

Eurozone officials are frantically examining various alternatives to be presented to the heads of member states tomorrow. Reuters revealed a document produced by the officials suggesting that the only way for Greece to avoid a selective default would be to impose a small levy on European banks combined with much smaller funding for Greece from the other eurozone members.

The banks? contribution would bring in revenues of 10 billion euros per year, to a total of 30 billion by 2014, which would signify the considerable contribution by the private sector that Germany and the Netherlands are calling for.

This contribution will be accompanied by the rollover of Greek bonds held by Greek banks, and with a considerable lightening of the payback terms of eurozone loans. The payback period could be extended from seven to 30 years and the interest rate reduced from 4.8 percent today to 3.5 percent.

The most likely scenario, sources say, is for the summit tomorrow to reach a mix of solutions combining the banks? contribution with the swapping of bonds and new funding for Greece from the European Financial Stability Facility (EFSF). Such a solution, however, would signify a pattern for Ireland and Portugal, too, so the eurozone would have to strengthen the EFSF and its financial governance.

Meanwhile the Financial Times suggested on Tuesday that Greece?s second bailout package would include 20 billion euros for the support of Greek banks.