* 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 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
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
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
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)