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Greek stocks slumped on Monday, led by the banks on mounting concerns they could be sunk if the EU makes private creditors take a 50 percent loss on their holdings of government bonds.

The Athens stock exchange lost 4.51 percent as leading banks tumbled more than 20 percent after EU leaders Sunday proposed a massive Greek debt restructuring as part of efforts to contain the eurozone debt crisis.

EU leaders held a series of meetings over the weekend in Brussels and will meet again on Wednesday to agree a comprehensive accord -- although many are sceptical they will do that after so many failed attempts.

"If decisions are again like previous ones, filled with asterisks, then the ground we are building on will be unstable," said Culture Minister Pavlos Geroulanos, a close associate of Prime Minister George Papandreou.

"While markets are wagering against Europe's success, Europe responds with slow and ambiguous steps. This is no way to solve the problem," he told state radio NET.

An earlier EU plan in July only called for a 21-percent cut in Greek debt held by private creditors, who were to exchange maturing Greek government bonds with longer-term instruments.

A 50-percent writedown would mean that the country's main four banks -- National Bank, Eurobank, Alpha and Piraeus Bank -- would need a recapitalisation of 8.9 billion euros ($12.4 billion) to maintain a core capital ratio of 9.0 percent, analysts at Natixis bank said in a note.

The four leading lenders have already written-off 3.2 billion euros to reflect the impact of a 21-percent debt reduction.

Speaking after the summit late on Sunday, Prime Minister Papandreou pleaded for a "viable" write-off for his country's debt -- meaning that whatever is decided should not come at the expense of the Greek banking system.

If the Greek banks fail, it is hard to see where the Greek economy will get the credit needed to halt and then reverse a deepening recession.

"There is a willingness to face this challenge in order to get a viable solution," Papandreou said after summit talks in Brussels.

He said Greece needed a "viable solution to the Greek debt -- especially on the participation by private Greek banks," pension funds and insurance firms.

The Greek leader told EU partners during the summit that the "immediate debt reduction" Athens would secure from a 50-percent writedown would be only 57.1 billion euros.

A close advisor of Papandreou, former European Central Bank deputy head Lucas Papademos, had earlier warned that a 50-percent write-off would in effect amount only to a 20-percent cut to Greece's debt mountain of over 350 billion euros ($487 billion).

Papademos noted that Greek banks, pension funds and insurance companies in July held nearly 30 percent of central government debt -- and losses there would have to be offset by the cash-strapped Greek state.

Another 30 percent held by the International Monetary Fund, European Central Bank and other official institutions could not be restructured for "political and legal reasons," Papademos said.

The Greek press meanwhile worried about the consequences of a larger write-down on Greek debt.

"Major haircut - we are playing with fire" cautioned the pro-government daily Ta Nea.

A cut of 60 percent "would sustain Greek debt" but there was, according to the newspaper, "still the risk of both a default and that banks would be kept out of the market due to a lack of financing."

Right-wing Eleftheros Typos fumed: "Nightmare haircut, a bomb for pension funds, bank nationalisation".

The left-wing Eleftherotypia newspaper said it feared that banks that resorted to funding from the European Financial Stability Facility, the European rescue fund, would move outside national supervision.

The National Bank of Greece (BNG) and the small Attica Bank, which manages pension funds for engineers, would be particularly affected, it said.

Greek pension funds are estimated to hold around eight billion euros in government bonds and banks around 44 billion euros.

AFP