UPDATE 2-Cheap rescue loans a quasi euro bond- Greek PM
* Euro zone loans to Greece are quasi euro bond-PM
* Says euro area becoming politically stronger
* Greece picks advisers on planned bond swap
(Adds advisers picked, opposition, PM quotes, background)
By George Georgiopoulos
ATHENS, July 27 (Reuters) - Europe's cheap rescue loans to Greece are tantamount to euro bonds, Prime Minister George Papandreou said on Wednesday and urged his ministers to speed up reforms ahead of a September lenders' review.
Papandreou, who has long pushed the launch of euro bonds to deal with the debt crisis troubling countries in the euro zone's periphery, said elements of the rescue package had brought the 17-nation bloc nearer to the idea.
"The decision of our European partners to lend us at 3.5 percent, an interest rate just above the one at which Germany itself is borrowing, is in essence tantamount to introducing a European bond," Papandreou told party lawmakers.
Euro zone leaders last week agreed on a wide-ranging new rescue package for Greece, including a bond exchange by banks, insurers and other holders of its debt, to cover funding needs until mid-2014 and avoid default.
On Wednesday, Athens picked financial and legal advisers on a bond swap it hopes to carry out next month.
Six days after clinching a new 109 billion euro aid package that cushions Greece from prohibitive borrowing rates, giving it time to repair its finances, Papandreou said Europe had been slow to take decisions but was becoming more united.
"The decisions we took at the EU Council last week are historic for Europe itself. They prove that even with delays and disagreements, it can behave as a big economic and political power, protect the credibility of its member states and foremost the credibility of the common currency," he said.
Bond buybacks in the secondary market via the EFSF rescue mechanism, part of the steps agreed at the summit, showed that a common debt management approach was taking shape in embryonic form in the euro zone, Papandreou said.
SPEEDING UP REFORMS
The conservative opposition, doggedly resisting calls for wider political consensus and pressing for tax relief to help the economy emerge from a deep recession, was quick to dismiss Papandreou's triumphant return from Brussels.
"People are tired of Papandreou's ramblings. After leading the country to the brink of collapse, he is lying to save himself," the New Democracy party's spokesman said in a statement.
Papandreou also sent letters to each of his ministers, setting priority targets, to ensure there will be no slack in applying the EU/IMF reforms programme as the country's next review looms in September.
The Finance Minister was tasked with a quick reform of the tax system as a top priority to fight tax evasion and boost lagging state revenues.
With a first working meeting on implementing the bond swap set to take place on Thursday, Athens picked a team of financial and legal advisers on the planned transactions.
Deutsche Bank, BNP Paribas and HSBC will be the joint dealers that will co-manage the voluntary swap of privately-held government bonds for longer maturity paper, the finance ministry said.
Greece's private sector creditors will take a 21 percent loss on their bond holdings as part of a 37 billion euro contribution to the rescue plan agreed last week.
The International Institute of Finance (IIF), a bank lobby group, has estimated a take-up rate of about 90 percent for the voluntary programme, which gives banks, funds and insurers the option to swap Greek debt with new bonds with maturities of up to 30-years.
Athens appointed the law firm of Cleary Gottlieb Steen & Hamilton as its international legal adviser on implementing the so-called private sector involvement (PSI) and Lazard Freres as its financial adviser.
Greek officials want to conduct the voluntary bond swap quickly to minimise the period during which Greece is expected to be in partial default by credit rating agencies.
Moody's on Monday cut Greece's credit rating by three notches to Ca, just one notch above default, to reflect the expected loss implied by the proposed debt exchange.
Standard & Poor's and Fitch currently rate Greece CCC, broadly in line with Moody's rating. Both have said Greece will likely be in temporary default as a result of the bond swap. (Editing by Patrick Graham)