Greece, creditors haggle to avoid costly default

Wed Jan 18, 2012 4:32pm EST
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By Dina Kyriakidou and George Georgiopoulos

ATHENS (Reuters) - Greece began a new round of bargaining on a bond swap deal with its creditors on Wednesday, with both sides under mounting pressure to iron out differences before they push Athens to a messy default.

The two sides said little after the more than two-hour meeting other than to note they would meet again on Thursday. Greece needs a deal within days to avoid the prospect of default when bond redemptions come due in March.

"They are working hard to breach differences and they will continue tomorrow," a source close to the talks told Reuters.

Officials and bankers earlier expressed hope that a deal could be struck in the coming days despite a breakdown in talks last week over the interest rate Greece will offer on new bonds and a plan to enforce investor losses.

Both points were on the table when negotiations resumed between Charles Dallara, head of the International Institute of Finance representing private creditors, and Greece's prime minister and finance minister.

With 14.5 billion euros ($18.5 billion) of bond redemptions due in late March, Athens goes into the talks with a weak hand.

It will take weeks to process the paperwork after a deal is reached and Greece's foreign lenders have warned and that the work must be cleared before Athens receives more international funds.

BRINKSMANSHIP   Continued...