* EU/IMF/ECB list reform measures on which Greek aid depends
* Fitch cuts Italy, Spain, other euro zone ratings
* EU's Rehn, PM Papademos predict debt swap deal in days
* Geithner calls for higher euro zone firewall
By Barry Moody and Deepa Babington
ATHENS, Jan 27 Greece expects to clinch a
long-awaited bond swap deal within days, Prime Minister Lucas
Papademos told Reuters on Friday, promising the country would
avoid an unruly default feared by financial markets worldwide.
But in a sign that Greece's troubles will be far from over
even with a deal, a report showed that the European Union and
IMF want Greece to push through more budget cuts and austerity
reforms before they sign off on a new bailout package.
The bond swap talks with private creditors made significant
progress on legal and technical issues and will continue
Saturday, both sides said late on Friday.
A preliminary deal could be sealed by Sunday evening, a
Greek government official said, with the aim of submitting a
public offer to bondholders by Feb. 15.
"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," Papademos said in an
interview. "I am quite optimistic an agreement will be reached
in the coming days."
Athens needs to seal the bond swap deal quickly to ensure it
gets bailout funds before massive bond redemptions come due in
late March. Under such a deal private creditors would have to
accept a sharp cut in the value of their bond holdings, easing
Greece's debt burden.
Round after round of talks have failed to produce an
agreement so far, pushing Greece precariously close to a messy
default that could trigger panic through the financial system.
EU economic and monetary affairs chief Olli Rehn also
sounded optimistic, saying an agreement was "very close" and
might be clinched as soon as this weekend.
Even after a deal with private creditors, Greece would still
need to persuade its euro zone partners and the International
Monetary Fund that it is doing enough to implement reforms they
require in return for a 130 billion euro bailout.
To do so, Greece will have to make extra spending cuts worth
1 percent of GDP - or just above 2 billion euros - this year,
according to a preliminary estimate drawn up by the EU and the
IMF in a document outlining the reforms Athens should enact.
Finance Minister Evangelos Venizelos acknowledged that talks
with the IMF, European Commission and European Central Bank on
the bailout were tough and that Greece was in a difficult
position because it had lost credibility abroad.
"Greece has not only to commit itself, Greece has to
deliver. Not all of the commitments have been fulfilled. That is
one of the critical issues to confidence," German Finance
Minister Wolfgang Schaeuble said at the annual World Economic
Forum in Davos.
Also in Davos, U.S. Treasury Secretary Timothy Geithner
pressed the euro zone to boost its bailout fund resources to
allow it to shield larger economies such as Italy and Spain.
"Our view is that the only way Europe is going to be
successful in holding this together is for them to bring a
stronger firewall and that is going to demand a bigger
commitment," Geithner told the Forum.
Also on Friday the Fitch agency downgraded the sovereign
credit ratings of Belgium, Cyprus, Italy, Slovenia and Spain,
indicating there was a 1-in-2 chance of further cuts in the next
two years. It cited their vulnerability in the near-term to
monetary and financial shocks.
BUDGET CUTS, PENSION REFORM
Greece's partners have grown increasingly exasperated with
its repeated fiscal slippages and delays on reforms, and they
want to see progress before they wrap up the country's second
multi-billion euro bailout in three years.
Parliamentary elections which could be held as early as
April are distracting politicians and officials from enacting
the unpopular austerity reforms, sources close to the talks say.
Greece's lenders are worried about whether a new government
would stick to reforms and Schaeuble has said all parties must
commit to them, no matter who wins the election.
Far-right leader George Karatzaferis, whose party also
belongs to the coalition government, said on Friday that the
lenders should not push Greece too far, particularly by asking
all of its party leaders to commit in writing to excessive
"No-one should expect a signature of subservience,"
Karatzaferis said in parliament. "Yes, we assume our obligations
but we will not bow to ultimate disgrace."
Top of the list of measures demanded by the EU, IMF and ECB
- known as "the troika" - in return for aid is the passing of a
supplementary budget with more cuts to reach fiscal targets in
2012. The troika suggests large spending cuts in defence and
health spending as well as cutting redundant state entities.
The EU and IMF are pressing Greece to adopt a much-delayed
reform of supplementary pensions and to ensure that a plan to
replace only one out of five civil servants leaving the
workforce is enacted.
They also want Greece to complete the opening up of its many
closed professions such as lawyers and pharmacists, which they
have been demanding for years, the document shows.
Likerwise they want the Bank of Greece to complete an
assessment of banks' capital shortfall and they expect the
government to enact legislation to improve wage flexibility and
liberalise product and service markets more, the document said.
The list of measures is not final and could change after
discussions with the Greek authorities, the document says.
Troika inspectors are in Athens to discuss this, with talks on
the new programme expected to go well into next week.
Government spokesman Pantelis Kapsis said the government
would try to negotiate on some of the points on the list but
repeated that Athens needed the bailout loans to stay afloat.
Asked if Greece would default without the aid, he told Skai
TV: "It's obvious, if we don't get the loan, how are we going to
find the money?"
Germany is also pushing for Greece to relinquish control
over its budget policy to European institutions as part of
discussions on the rescue package, a European source told
Reuters on Friday.
Budget data published on Friday showed the size of the
problem. The general government deficit, the benchmark for
fiscal targets, reached 17.14 billion euros for the first nine
months of the year, already just exceeding an initial 17.1
billion euro target for the full year.
The emerging private sector bond swap deal seems set to
leave a funding gap of 12-15 billion euros to bring Greece's
debt down to a level of 120 percent of annual output regarded by
the IMF as sustainable, EU officials say.
Deutsche Bank Chief Executive Josef Ackermann
confirmed that private creditors have offered to take losses of
almost 70 percent in the debt swap.