Germany is working behind closed doors to plan "hard default" of Greece, which private lenders, banks and pension funds respectively, assume 60% losses, with the risk of causing a chain reaction in southern Europe, in the absence of reliable measures of protection.
Officials in Berlin said that private investors are likely to suffer further losses related to holdings of Greek sovereign bonds over the 21% agreed in July, according to The Telegraph.

The exact level of these losses will depend on the findings of inspectors EC / IMF mission which ended in Athens.

Delegation of EC / ECB / IMF announced on Tuesday that Greece will receive the next tranche loan of 8 billion euros in November, after reports troika will be approved by finance ministers of the euro area and the Board of the IMF.

"Much has happened since July. Greece has not fulfilled its commitments so that we can consider that the revaluation in 21% decrease in debt is no longer sufficient," said one source.

German Finance Minister Wolfgang Schäuble told the Frankfurter Allgemeine that initial review is probably too low, and banks must have sufficient capital to withstand large losses if necessary.

Berlin circulated estimates of a 60% reduction of debt to private creditors.

German policy changes like last year when Chancellor Angela Merkel first proposed downward revision of the Greek sovereign bond value, which led to an unprecedented spurt of the crisis and forced to seek financial aid Ireland international.

"It can take place of the snowball effect. Markets will turn their attention immediately to Portugal, where two-year bond yields reached 17%," said Andrew Roberts, director in RBS loans.

Greek term bonds are traded ten years with a 60% discount on the market, but European banks should not revise down assets as long as there is a formal default and debt are part of long-term loan portfolio.

The danger is that banks are obliged to "crystallize" damage before to increase capital.

Germany is likely to open a Pandora's box with this proposal, consider Marcel Alexandrovich, an analyst at Jefferies Fixed Income.

"It would be a disaster, a sign that investments in sovereign bonds are not safe. Investors would withdraw their investments in Portugal, Ireland, Spain and Italy," warned Alexandrovich.

The analyst said that France is opposed, as the European Central Bank.

"They know that banks need time to adapt. I do not think that Europe will pull the trigger," the analyst added.

Merkel and French President Nicolas Sarkozy pledged Sunday to do whatever is necessary to guarantee a bank recapitalization plan for further support of Greece and the euro area by the end of this month.

Newspaper La Tribune reported in late September that the Germans are working on a secret plan called "EUREC".

Under the plan developed by consultants very influential in the government of Chancellor Angela Merkel, Greece should include all public assets in a structure to sell a 125 billion euro European institutions and thus reduce their debt levels from 145% of GDP to 88%.