France offered a radical solution for banks to roll over some Greek debt for 30 years as the Greek government fought for political support of its five year austerity plan to avert bankruptcy.

With depositors fleeing Greek banks in growing numbers and financial markets watching anxiously, President Nicolas Sarkozy told a news conference in Paris that French banks had reached a draft agreement with the authorities on a voluntary rollover of maturing bonds.

He said that "We concluded that by stretching out the loans over 30 years, putting (interest rates) at the level of European loans, plus a premium indexed to future Greek growth, that would be a system that each country could find attractive.”

The plan was put to a meeting of international bankers and European Union officials with the International Institute of Finance in Rome but no decision was taken, an Italian Treasury official said.

In a sign of ebbing confidence that Greece can avoid default on its EUR 340 billion debt mountain, Moody's said Greek banks had lost about 8 percent of private sector deposits so far this year as customers burned their savings due to unemployment, transferred funds abroad or bought gold.

French government sources said under an outline deal, banks would reinvest 70% of the proceeds when Greek bonds fall due in 2011-14 and cash out the rest. Of the amount reinvested, 50% would go into the new 30 year bonds and 20% would go into zero-coupon AAA bonds with deferred interest.

The sources said that the new bonds would be placed in a Special Purpose Vehicle, effectively removing Greek debt from the balance sheets of participating banks. Banks would hold equity in the SPV instead.

(Sourced from Reuters)