Greece Races for Double Debt Deals in Last-Ditch Talks
Greece raced on Friday to clinch debt-saving deals in parallel negotiations with private creditors and its EU-IMF bailout partners ahead of a looming default in March.
Prime Minister Lucas Papademos was scheduled to meet again with global bank group representatives after late-night talks on Thursday as his finance minister held talks with senior EU-IMF auditors on a new Eurozone rescue loan.
Greece is seeking to slash around 100 billion euros ($129 billion) from its huge debt through a voluntary bond swap with creditors, a process that would unlock a new eurozone rescue package worth 130 billion euros overall.
The International Institute of Finance, a group representing around 450 financial institutions worldwide, on Thursday said "progress" had been made and that discussions will continue again on Friday.
Under the so-called private-sector initiative (PSI), banks and other financial institutions are expected to take at least a 50 percent "haircut" on their Greek debt, which would remove about 100 billion euros from Athens's massive debt burden of more than 350 billion euros.
The talks have hinged on the interest rate to be offered for new bonds that will replace maturing debt that is being erased.
A deal seems close on a flexible rate of around four percent, Greek newspapers said on Friday.
In a sign that an agreement is at hand, the International Monetary Fund on Thursday said it was ready for talks on extra rescue funds needed to keep Athens from defaulting in March.
"The Greek authorities have requested to begin discussions on a new arrangement with the Fund," International Monetary Fund spokeswoman Conny Lotze said in an email to Agence France Presse.
"The arrangement would require exceptional access under the Fund’s lending rules," she said.
Because of that, the IMF management and staff consulted with the Fund's executive board "so that the mission can begin negotiations with the Greek authorities on the new arrangement."
The IMF was not originally part of the Eurozone bailout agreed in October.
Greece wants an outline of the deal to be ready by Monday, and a full agreement by January 30 when the European Union is scheduled to hold a summit.
It has a looming loan repayment worth 14.3 billion euros on March 20 which it cannot honour without financial assistance.
"By next Monday, at the (EU) summit, we must have a final framework for the new (loan) programme, not just for the (bond swap)," Finance Minister Evangelos Venizelos told parliament on Thursday.
Hedge funds holding Greek debt have resisted the write-down and are reportedly planning an appeal to the European Court of Human Rights over the issue.
Greece has warned it could pass legislation to force holdouts to join the bond swap through collective action clauses (CACs), a move that may trigger claims by creditors for default compensation.
However ministers have stressed they would prefer a voluntary deal.
"It must be of a voluntary nature, and lead to complete participation, namely 100 percent participation," said Venizelos.
But he noted that all bondholders had to participate for the operation to produce to achieve the 50 percent reduction in the value of the debt held by private creditors.
A successful conclusion to the talks would also enable the stricken Eurozone member to hold early elections, expected in April, to replace an uneasy political coalition supporting the present temporary government.
The Friday meetings with senior representatives from the European Union, the IMF and the European Central Bank -- known locally as the 'troika' -- will focus on the next three years of an economic blueprint adopted by Greece in return for the 130-billion-euro Eurozone bailout, and an earlier loan in May 2010.
Greece is under pressure to revise its private-sector wage agreements to reduce labor costs and improve competitiveness.
Greek unions say such a measure would only exacerbate a deep recession brought about by two years of austerity measures already adopted under the EU-IMF economic adjustment plan.
Source: Agence France Presse
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