German banks moved closer to participating in a Greek bailout ahead of Thursday's summit called by the German government to discuss private-sector involvement.

German banks have agreed in principle to use a French proposal, for banks to roll over some Greek debt for 30 years, as the basis for negotiating private-sector participation in a Greek debt rollover, sources told Reuters.

The French proposal should form the basis for working out a German decision, one of the sources said.

However, a third source said other approaches were on the table and that the French proposal needed clarification.

French banks, the most exposed to the Greek crisis, have reached an outline agreement to roll over holdings of maturing Greek bonds as part of a wider European plan to avoid sovereign default.

It remains unclear whether the agreement would be backed by German insurers, another person familiar with the talks said.

Deutsche Bank Chief Executive Josef Ackermann had told Reuters Insider the French proposal was one among several, and that any rollover solution had wide-ranging implications.

If you (have a) rollover and you have some sort of an event ... then of course you would have a markdown of the entire portfolio, which is a very expensive thing to do, he said.

So the French banks and some others are saying, rightly so, 'we should have some credit enhancement'. Now what is the impact of the credit enhancement on the markdowns is a very difficult question. But that is only one question, there are many others in this context.

The final details of an agreement, such as the volume of any rollover and the coupon payments of new bonds, still need to be finalized, the sources also said.

The French proposal for restructuring Greek debt involves two options for bondholders to choose during a period from July 2011 to June 2014, according to a draft seen by Reuters on Tuesday.

Banks would also reinvest 70 percent of the proceeds when Greek bonds fall due in 2011-14 and cash out the rest. Of the amount reinvested, 50 percent would go into the new 30-year bonds and 20 percent would go into zero-coupon AAA bonds with deferred interest.

German private-sector banks, which quantify their exposure to Greece at 10-20 billion euros, have called for the state to offer an incentive to encourage participation.

German insurers estimate their holdings are substantially less than 6 billion euros, or 0.5 percent of the 1.2 trillion euros of insurers' invested assets.

(Reporting by Kathrin Jones, Annika Breidthardt, Alex Chambers, Philipp Halstrick, Arno Schuetze, Jonathan Gould; Writing by Edward Taylor; Editing by David Hulmes)