(Bloomberg News) European governments hinted that bondholders may be saddled with bigger losses on Greek debt, intensifying market jitters that a second aid package designed to quell the fiscal crisis might unravel.
Finance ministers in Luxembourg considered recrafting a July deal that foresaw investors contributing 50 billion euros ($66 billion) to a 159 billion-euro rescue. The debt exchanges and rollovers targeted bondholder losses of 21 percent.
"We have to recalculate what that will actually cost and how to deal with it, but that is not being discussed now because we haven't had the report from Greece yet," Austrian Finance Minister Maria Fekter told reporters today at a meeting of European officials.
Together with plans to get more firepower out of the region's 440 billion-euro rescue fund, the review of Greece's aid package was a response to growing international frustration with Europe's inability to get to grips with the crisis after 18 months of incremental steps marked by clashes between Germany, France and the European Central Bank.
European stocks fell for a third day and investors shunned riskier countries' bonds amid concern that the crisis is careening out of control. The euro has dropped about 8 percent since the end of August, trading at $1.3182 as of 1:30 p.m. in London.
Europe's financial leaders are fighting on multiple fronts, trying to repair Greece's recession-struck economy while insulating Italy and Spain and shoring up banks that the International Monetary Fund says face as much as 300 billion euros in credit risks.
The stress on banks in Europe's better-off economies was in the spotlight today with shares in Dexia SA, a French-Belgian lender, plunging on concern it will require a second bailout. The French and Belgian governments vowed "all necessary measures" to protect clients and will guarantee all Dexia's loans.
A seven-hour meeting of euro-area finance chiefs yesterday yielded an agreement to pursue "technical revisions" to the July accord on private sector burden-sharing, Luxembourg Prime Minister Jean-Claude Juncker told reporters early today. He spoke of "changes" to the Greek outlook that spurred the reassessment.
Debt Swap
Juncker gave no details about a possible recalibration of the "voluntary" debt exchange, the new element in the follow- up package hammered out after last year's 110 billion-euro lifeline failed to stabilize Greece. The Institute of International Finance industry group estimates that the debt swap, still being negotiated, will amount to a writedown of 21 percent.
"No, no," Spanish Economy Minister Elena Salgado told reporters today when asked about deeper writedowns. "I insist: no."