Greece launches bond swap talks with banks

Tue Nov 15, 2011 6:17am EST
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By Harry Papachristou and Lefteris Papadimas

ATHENS (Reuters) - Greece and private bondholders will begin thrashing out a deal on Thursday to halve its public debt, a key pillar of a bailout plan to save the country from bankruptcy and ejection from the euro zone, sources said on Tuesday.

While politicians debate in parliament the degree of support they are prepared to give a new coalition government to implement the fresh bailout, Greek and EU negotiators are to launch talks to flesh out the deal with the International Institute of Finance (IIF) which represents banks.

"Negotiations between the IIF, the EU and the IMF will start on Thursday. There may be some preparatory talks on Wednesday. A second meeting will follow," said a source at a major Greek bank who asked not to be named.

"The aim is to have a conclusion soon on the final proposal that will be submitted to the private bondholders. There is no specific deadline for this," the source said, adding that the main task was to convince foreign banks who hold two-thirds of the bonds.

A source familiar with the plans said IIF Managing Director Charles Dallara and Deutsche Bank's Josef Ackermann, who chairs the group, would both attend.

The new bailout, Greece's second financial rescue in little more than a year and worth a total 130 billion euros in return for more austerity measures, was agreed by euro zone leaders at a summit last month.

The deal would halve the country's 200 billion euros of obligations to private bondholders, recapitalize Greek banks and provide Athens with loans to service interest payments and running costs such as wages and pensions.

The EU has made it condition in releasing a 8 billion euro loan that all coalition parties sign a commitment to the bailout terms. But the leader of the conservative New Democracy party says he will not to sign, endangering the tranche needed to avoid default by mid-December.   Continued...