Greece, creditors on verge of clinching debt deal

Sat Jan 28, 2012 3:00pm EST
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By Lefteris Papadimas and Renee Maltezou

ATHENS (Reuters) - Greece and its private creditors said on Saturday they were piecing together the final elements of a debt swap and expected to have a deal ready next week, essential for sealing a new bailout and avoiding an uncontrolled default.

After muddling through round after round of inconclusive talks, the negotiations are in their final phase - though it appeared unlikely that a preliminary deal would be secured in time for a European Union summit on Monday.

Greek bondholders said the two sides were finalising a deal along the lines of a proposal made by Jean-Claude Juncker, the chairman of euro zone finance ministers.

The bondholders' comments suggested creditors had accepted Juncker's demand for a coupon, or interest rate, of below 4 percent on new, longer-dated bonds that Athens will swap for existing debt.

The coupon had been the main stumbling block in the talks, with euro zone ministers rejecting private creditors' demand for a coupon of at least 4 percent - above the 3.5 percent level Greece and its European partners had been holding out for.

"Next week we will be in a position to complete the debt swap," Finance Minister Evangelos Venizelos said, citing significant progress at Saturday's talks. "We are really one step away from the final deal."

He confirmed that the two sides were working along the "exact framework" provided by euro zone finance ministers.

Charles Dallara, chief of the Institute of International Finance that negotiates on behalf of banks and insurers, is due to leave Athens on Sunday but will remain in contact with Greek authorities, the IIF said.   Continued...

<p>Greece's Prime Minister Lucas Papademos (L) escorts Finance Minister Evangelos Venizelos after a meeting in Athens January 28, 2012. Greece and its private creditors head back to the negotiating table on Saturday to put together the final pieces of a long-awaited debt swap agreement needed to avert an unruly default. REUTERS/John Kolesidis</p>