Greece Haggles With Creditors Again In Desperate Attempt To Avoid Disaster

ticking pressure

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ATHENS, Greece (AP) — Greece’s prime minister was to resume talks Friday with representatives of private creditors in the hope of reaching a debt reduction deal essential to avoid a disastrous bankruptcy.Lucas Papademos will meet for a second day with Charles Dallara, head of the Institute of International Finance banking lobby, and Jean Lemierre, senior adviser to the chairman of French bank BNP Paribas, the prime minister’s office said. Finance Minister Evangelos Venizelos was also to attend the meeting, set for Friday evening.

A senior Greek government official said Thursday that, despite delays in concluding the negotiations, Athens is still aiming to submit its formal offer for the bond-swap deal to banks and other private creditors by Feb. 13.

Speaking at the World Economic Forum in Davos, Switzerland, Friday, European Monetary Affairs Commissioner Olli Rehn said he hoped a Greek deal would be reached “if not today maybe by the weekend.”

Private creditors are being asked to write off half their Greek bondholdings, and in return accept cash payments and new bonds with longer maturities. The euro100 billion ($129 billion) writedown is a vital condition of a second bailout for Greece, which has been relying on euro110 billion in international rescue loans since May 2010.

Athens needs the deal before a euro14.5 billion bond repayment on March 20 that it cannot afford.

An IIF statement said Thursday’s talks focused on legal and technical issues. “Some progress was realised,” it said.

A major sticking point is the interest rates the new bonds will carry. Greece’s partners in the 17-member eurozone are pressing bondholders to accept a rate considerably lower than they want — well below 4 per cent on average.

Whatever debt relief Greece doesn’t get from the investors will have to come from its European partners and the International Monetary Fund, its bailout creditors.

In return for the rescue loans, Greece has imposed tough austerity measures, including salary and pension cuts, repeated rounds of tax hikes and labour reforms.

But frustration has grown at what international officials have said is a too slow pace of reforms, with Greece frequently missing its fiscal targets.

German Finance Minister Wolfgang Schaeuble was quoted Friday as saying that, in an interim report on Monday, Greece’s international debt inspectors said that “Greece still has not fully implemented the April 2010 agreements” set out in the initial bailout.

“However, we insist on Greece fulfilling the conditions from the first aid program,” Schaeuble told the German daily Stuttgarter Zeitung. “We’ve had enough announcements, now the government in Athens must act. Only then can we talk about a second program.”