Greece, creditors laboriously piece together debt deal

ATHENS Fri Jan 27, 2012 6:37pm EST

1 of 2. Greek Prime Minister Lucas Papademos is seen in his office during a meeting with Greek political leaders in Athens January 19, 2012.

Credit: Reuters/Yiorgos Karahalis

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ATHENS (Reuters) - Greece and its private creditors head back to the negotiating table on Saturday to put together the final pieces of a long-awaited debt swap agreement needed to avert an unruly default.

After weeks of muddling through round after round of inconclusive talks, the negotiations appear to be in their final phase with both sides hoping to secure a preliminary deal before Monday's summit of euro zone leaders.

The debt swap, in which private creditors are to take a 50 percent cut in the nominal value of their Greek bond holdings in exchange for cash and new bonds, is a pre-requisite for the country to secure a 130-billion-euro rescue package.

Prime Minister Lucas Papademos told Reuters in an interview he expects the debt talks to be concluded within days.

"We made significant progress over the last few weeks and in the last few days in particular. We are trying to conclude the discussions as quickly as possible. I am quite optimistic an agreement will be reached in the coming days," he said.

Still, concern has grown that the deal may not do enough to get the country's debt reduction plan back on track, and that Greece's European partners will be forced to stump up funds to cover the shortfall.

Athens also faces problematic talks with the "troika" of foreign lenders - the European Commission, IMF and European Central Bank - who have warned it needs to do more to drive through painful reforms before they dole out any more money.

"There is a lot of work to be done because at the same time we have the negotiations for the new (bailout) program," a Greek finance ministry official said.

"It's all very dense, difficult and crucial. There is optimism because the country needs to survive and we need to protect its citizens because they have suffered a lot."

Athens and its creditors have broadly agreed that new bonds under the swap would probably have a 30-year maturity and a progressive interest rate. The deal is aimed at chopping 100 billion euros off Greece's crushing 350-billion-euro debt load.

But they have wrangled for weeks over the interest rate Greece must pay on the new bonds and pressure has grown in recent days on the European Central Bank and other public creditors to accept a cut in the value of their Greek bond holdings like the private sector creditors.

A debt deal must be sealed in about three weeks at the latest as Greece has to repay 14.5 billion euros of debt on March 20. Otherwise Greece will sink into an uncontrolled default that might spread turmoil across the euro zone.

Papademos promised on Friday this would not happen. "Greece will not default," he said.

Senior euro zone officials have also expressed optimism on the debt deal, though previous predictions of an imminent agreement have failed to become reality.

Greece is in its fifth year of recession, with hopes of a quick exit of the crisis receding rapidly due to squabbling politicians, rising social anger and an inability to get its debt load under control.

(Writing by Deepa Babington; editing by David Stamp)

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Comments (4)
bartreng wrote:
The whole thing is disgusting. They sign agreements but don’t implement
them. They make promises but don’t keep them. They cheated their way into the euro and now they cheat to stay in it. Have those people no sense of honour? Shame on Greece, its politicians and its people.

Jan 27, 2012 6:22am EST  --  Report as abuse
nialet wrote:
Greece will find political will power to do what is best for interest of its people and not the international bankers. Be Love! People are waking up!

Jan 27, 2012 11:27am EST  --  Report as abuse
mbc001 wrote:
Papademos promised on Friday this would not happen. “Greece will not default,” he said.

Take this quote the bank, like every other one from Greece:
10 Jan 2010: “No EU bailout for Greece as PM promises to ‘put house in order’”
5 March 2010: “German Chancellor Angela Merkel has said Greece does not need financial aid, after talks with Prime Minister George Papandreou in Berlin. She said Greece has not asked for financial support and that the stability of the eurozone is “assured”.”
2 May 2010: “Eurozone members and the IMF have agreed a 110bn-euro (£95bn; $146.2bn) three-year bail-out package to rescue Greece’s embattled economy. In return for the loans, Greece will make major austerity cuts which Prime Minister George Papandreou said involved “great sacrifices”. The EU will provide 80bn euros in funding and the rest will come from the In”
19 June 2011: “Greece needs another €110bn bailout to avoid debt default, says Papandreou. Greek prime minister puts figure on new bailout needs for first time as he struggles to get country behind austerity measures.”

Jan 27, 2012 8:03pm EST  --  Report as abuse
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