Greek bondholder talks continue

Greece and its private sector creditors are converging towards a debt swap deal that would cause a real loss of 65 to 70 per cent for private bondholders, a banking official close to the talks said today.

"The two sides are converging," the official said after a meeting between IIF chief Charles Dallara, Greek prime minister Lucas Papademos and finance minister Evangelos Venizelos.

"The new bond will likely have a 30-year maturity and a grace period of 10 years. It will have a stepped-up coupon
structure which will average out in the area of 4 per cent," the official said.

The country is running out of time as it pushes to wrap up an agreement by Monday paving the way for a fresh injection of aid before €14.5 billion of bond redemptions fall due in March.

After a breakdown in talks last week over the coupon, or interest payment, that Greece must offer on its new bonds raised fears of a disastrous bankruptcy, the two sides appeared to be moving to overcome their differences.

"The atmosphere was good, progress was made and we will continue tomorrow afternoon," finance minister Evangelos Venizelos said after yesterday's round of talks in Athens with Charles Dallara, head of the Institute of International Finance representing bondholders. The IIF issued a statement echoing the minister, and called the discussions "productive".

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

Greece needs to agree a deal before funds are given out from a €130 billion rescue plan that the country's official lenders, the European Union and the International Monetary Fund, drew up in October.

The paperwork involved alone is expected to take weeks, meaning failure to secure a deal soon could put Athens at risk of a chaotic default in March, which in turn could jolt the financial system and tip the global economy into recession.

The two sides, which broke off negotiations on January 13th before resuming them two days ago, have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors, raising the danger of a sovereign default.

Adding to the pressure, officials from the troika of foreign lenders have begun meetings with the Greek government today to discuss reforms and plans to finalise that bailout package.

"Now is the crucial moment in the final battle for the debt swap and the crucial moment in the final and definitive battle for the new bailout," Mr Venizelos told parliament on yesterday. "Now, now! Now is the time to negotiate for the sake of the country."

The troika heads are meeting Mr Venizelos and are scheduled to visit prime minister Lucas Papademos this afternoon.

Agencies