The almost uncontrolled spread of the debt crisis in the eurozone, which coincides with the start of negotiations on the PSI implementation, is creating second thoughts about the conditions that will be included in the final agreement and will determine the amount of capital that Greek banks will need to cover losses.

At a meeting today between Finance Minister Mr. Evangelos Venizelos and the heads of Greek banks, a first debate took place, in contrast to the aggressive policy that had been adopted against banks lately, by Mr. Venizelos. The debate was very mild.

Reportedly, the return of PM Mr. Lucas Papademos from his first trip to Brussels and Frankfurt, accompanied by the possibility of alternative proposals on the PSI implementation had an effect.

The primary goal remains the voluntary participation of the private sector. Both the government and European officials seem to recognize that the height of the cut to 50% involves large capital losses may make a voluntary contribution uncertain. Therefore, in order to ensure both voluntary and otherwise a major participation, all solutions, including the motives for individuals to accept the bonds haircut, are being considered.

Although the debate is just the beginning and no conditions have been set, nor details, the feeling creates a slight positivity for the final outcome. According to stakeholders, the PSI will probably require more time, it is not impossible to shift towards the outcome being decided in January 2012.

That is why the losses estimate from PSI will not be included in the third quarter results of banks, which will be announced next week.