France believes the euro zone's EFSF rescue fund should be turned into a bank to leverage its firepower and Greek bondholders will have to accept losses higher than 21 percent, a finance ministry source said on Thursday.

We think that obviously the most solid way (of leveraging the EFSF) is for the fund to become a bank so that, in collaboration with the ECB, it could leverage itself, said the source.

This hypothesis is uncertain because the ECB has already issued a negative opinion on it. We continue to talk: that is what would work best.

Many analysts agree the most effective way to give the 440 billion euros (385 billion pounds) European Financial Stability Facility more muscle would be to treat it as a bank, making it eligible to borrow at the European Central Bank's regular funding operations.

But both the ECB and Germany have strongly opposed the central bank's involvement.

The idea is not to have 2 trillion euros in the fund, it's to have a leverage effect by using other European or international institutions, the source said. If a state puts in one (to the fund), we could have three or four times that from other partners.

Euro zone officials told Reuters on Wednesday that banks would be asked to write down between 30 and 50 percent of their Greek debt holdings as part of a revised plan to avert a disorderly default.

The French source said it was important that the larger haircut on Greek debt, which should be announced as part of a package unveiled at an October 23 European Union summit, should not trigger a credit event on Greek debt, requiring the payment of credit default swaps.

It will probably be higher than 21 percent. We are discussing the level so that it can be acceptable and sustainable, the source said.

The source said EU policymakers were also looking at how a more leveraged rescue fund could be used to insure against losses on sovereign debt, for example on Italian bonds, by offering partial guarantees.

The European fund could be used to cover (bondholders) losses which would justify them staying invested.

Regarding this weekend's G20 finance ministers' meeting in Paris, the source said that the aim was to prepare a plan for rebalancing global growth prospects in the medium-term by agreeing on corrective measures by the seven member states found to have economic imbalances at an April meeting.

That will not be announced here (in Paris), said the source. By Cannes, each country will announce two or three steps ... which will have an impact on the real economy.

The source also said he was confident an agreement could be reached on the terms for China's yuan to enter the basket of currencies underpinning the IMF's Special Drawing Right.

It would be down to the Chinese, however, to specify a timetable for meeting the criteria, he said.