Greece, creditors move to breach gap as clock ticks

Thu Jan 19, 2012 5:14pm EST
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By Sophie Sassard and Dina Kyriakidou

LONDON/ATHENS (Reuters) - Greece and its private bondholders inched closer on Thursday to a vital debt swap deal needed to avoid a messy default by Athens, with both sides saying progress has been made and negotiations would continue on Friday.

Nearly a week after talks hit an impasse over the coupon, or interest payment, that Greece must offer on its new bonds under the swap, there were signs the two sides were moving to overcome their differences as time to strike a deal runs out quickly.

"The atmosphere was good, progress was made and we will continue tomorrow afternoon," Finance Minister Evangelos Venizelos said after talks with Charles Dallara, head of the Institute of International Finance representing bondholders.

The IIF issued a statement echoing the minister.

Bankers and sources close to the talks say a deal could be wrapped up in the next few days, though previous predictions of a quick resolution have proven premature.

The stakes could not be higher this time. Greece must thrash out a deal within days to pave the way for a new infusion of aid that allows it to avoid bankruptcy when 14.5 billion euros ($18.5 billion) of bond redemptions fall due in March.

Even if a deal is struck rapidly, the paperwork will take weeks and Greece's official lenders, the European Union and the International Monetary Fund, say the work must be cleared before funds are doled out from a 130 billion euro rescue plan they drew up in October.

Turning up the pressure before Thursday's round of talks, Venizelos told lawmakers that a large chunk of the bond swap must be agreed by noon on Friday and formalized before Monday's meeting of euro zone finance ministers.   Continued...