Banking tax plan dropped from Greek package: sources

The decision follows talks between German Chancellor Angela Merkel and French President Nicolas Sarkozy on Wednesday, when they said they had struck a deal on a new package for Athens, but did not release any details.

"You should assume that there will not be a banking tax," one source told Reuters, adding that European Central Bank President Jean-Claude Trichet, who had also met Merkel and Sarkozy, agreed with that position.

Three more sources involved in a preparatory meeting ahead of the euro zone leaders' summit on Thursday, when the package is expected to be finalized, said the banking tax proposal had been dropped.

European banks quickly criticized the tax proposal when it emerged this week, saying it was indiscriminate in that it would tax all banks, even those not exposed to Greece. They said they would challenge the proposal in the courts if it was enacted.

Representatives of the banking industry, including the chief executive of Deutsche Bank, Josef Ackermann, and Baudouin Prot, the chief executive of BNP Paribas, will be attending Thursday's summit, one banking source told Reuters.

German and French banks, including Deutsche and BNP, are among the most exposed to Greek sovereign debt.

While there are very few details of the Franco-German deal struck on Wednesday, sources said it would involve private sector involvement and would not cause either a default or selective default of Greek debt, a red line for the ECB.

(Writing by Luke Baker, editing by Rex Merrifield)

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