The German government is designing a plan to restructure Greece’s debt against the wishes of the European Central Bank, according to The Financial Times.While the plan is not finalised, one possible resolution includes the swapping of Greek debt with eurozone backed debt. Presumably, the eurozone debt would have a lower yield, but the likelihood of receiving payment on this asset would be higher. The EFSF, the region’s bailout fund, may also be used to buy Greek debt.
The downside of such a plan is the potential impact on Greek and other European banks. That’s what worries the ECB, and the Greek government.
The French banking giants of Societe Generale and BNP Paribas were listed as two of the most exposed to Greek debt last year. Greek sovereign debt is likely to remain under pressure, even though the country’s government proposed new austerity measures this week.