Paris - AFP
Leading banks were meeting in Paris on Wednesday on how to support a new rescue for Greece, their spokesman told AFP shortly after a rating agency issued a new warning and another downgraded Portugal. The critical issue, which has delayed until September any eurozone decision on a new rescue for Greece, is how banks could shoulder part of the cost of help without triggering dangerous default repercussions across financial markets. Some of the leading banks owed money by Greece would meet on Wednesday under the aegis of their representative body on sovereign debt problems, the Institute of International Finance. A spokesman for this body told AFP that officials from several countries would also be present. The meeting is the latest in a series of technical sessions on how to construct the terms of participation by private bondholders in a new rescue, the spokesman said. A banking source said that the meeting would be held at the headquarters of French bank BNP Paribas in Paris. A French banker, who declined to be named, said: \"It is a technical meeting, and there will certainly be others.\" The source said that the meeting was unlikely to result in any significant outcome, and another source said that those attending were unlikely to make any statement afterwards. New French Finance Minister Francois Baroin said on Wednesday that a new rescue for Greece had to be ready for September and that the eurozone still had \"a few weeks\" to work out how private banks would participate. The IIF said on Friday that the international financial community was ready to take part in a private initiative to help Greece. The IIF has said that it is working on a small number of options, and in particular on rolling over some Greek debt so that the money would not have to be repaid for many years, and on the reinvestment of debt owed into long-dated debt backed by guarantees. This second proposal is broadly in line with a proposal made by French creditor banks to reinvest 70 percent of money repaid by Greece on existing debt as it comes to term. Of the amount of 70 percent, an amount equivalent to 50 percent of the total would be placed in 30-year debt and the remaining 20 percent would be placed in a separate vehicle to act as a guarantee. Then on Saturday, eurozone finance ministers agreed to release the fifth slice of the first rescue agreed for Greece, in May last year, in recognition that last week the Greek parliament had approved new tough budget reforms. The decision by the ministers brought brief relief to financial markets, but then on Monday the credit rating agency Standard & Poor\'s hit sentiment with an assessment that the outline proposals from the French banks for a second rescue would probably cause it to issue a selective default rating for Greek debt. The European Central Bank has warned that what it terms a \"credit event\", taken to mean a reorganisation of Greek debt perceived to amount to a default, could cause it to cease lifeline funding for the Greek banking system. However, a report in the Financial Times newspaper on Tuesday suggested that the ECB might continue this funding unless all leading rating agencies issued default judgements. Many analysts on financial markets say that the way any so-called voluntary participation by private bondholders such as banks, insurance compaines and savings funds in Greek debt is structured is critical because of the risk that it could spark domino repercussions. The countries considered to be in the first line of risk are the two other eurozone countries also being rescued, Ireland and Portugal. Late on Tuesday, Moody\'s rating agency downgraded Portuguese debt by four notches to Ba2 and said it could go further, commenting that Portugal might need a second rescue.