Greece may seek Spanish-style rescue of banks as part of debt crisis solution


Greece could return cap-in-hand to its European partners for a Spanish-style rescue of its ailing banking sector despite receiving billions of euros in bailout loans.

A Greek government source said the country was looking for ways to lessen its burden as it attempts to put its economy back on course, including another writedown in the value of its debt or a "strong recapitalisation of its banks".

The country remains mired in a deep recession, and will have contracted by 25 per cent by time the recession ends, the Greek finance minister, Yannis Stournaras, said last week.

Yesterday, the source told The Independent that Athens, which has already made sharp reductions in spending, was willing to introduce another round of spending cuts – but only as long as Europe gave something in return. "Greece will keep its pledge and implement the measures but on the condition that it comes as part of a European solution to our debt crisis… This can involve different scenarios," the source said, suggesting that the country could seek the kind of sector-specific rescue package recently secured by Spain, with Europe pledging up to €100bn (£80bn) to prop up Madrid's banks.

The news came after the conservative Prime Minister, Antonis Samaras, agreed on the basic points of a new austerity package with the chiefs of socialist PASOK and smaller Democratic Left. The left-wing leader Fotis Kouvelis and socialist Evangelos Venizelos said that the recession-hit country should be allowed more time to implement its structural reforms and painful pension and wage cuts.

Europe has so far overruled any write down of Greek debt that would involve governments or the ECB. The country's lenders have already provided more than €200bn-worth of loans, while investors have suffered losses on the value of their bonds in February's debt-swap deal.

Earlier this week, the IMF Managing Director Christine Lagarde said Greek debt "will have to be addressed" – which was interpreted by many to mean that Athens would have to once again restructure its debt, an idea that Europe vehemently dismisses so far.

After the party leaders' meeting yesterday, the Finance Minister, Yannis Stournaras, said the agreement of party leaders had given him the "basis for a strong negotiation" with the "troika" of the IMF, the European Central Bank and the European Commission. Talks are expected to resume on Monday.