Greece's negotiations over a debt swap with private creditors entered a new phase today with focus on how much the European Central Bank and other public creditors may need to contribute.

Athens, which needs a deal quickly to avert a chaotic default when a major bond redemption comes due in March, hopes the talks can be wrapped up this week.

The top negotiator for the banks and insurers, Charles Dallara, is scheduled to meet prime minister Lucas Papademos in the early evening after experts meet to discuss technical details.

International Monetary Fund managing director Christine Lagarde put pressure on the ECB yesterday, saying it and other public creditors may need to accept losses if those taken by the private sector are not enough to bring Greece's debt burden down to a sustainable level.

The European Union's top economic official also said more public money will be needed to make up a shortfall in a second bailout for Greece after a debt swap deal is clinched in the coming days.

"We are preparing a package which will pave the way for a sustainable solution for Greece, and in that package, yes, on the basis of the revised debt sustainability analysis, there is likely to be some increased need of official sector funding, but not anything dramatic," EU economic and monetary affairs commissioner Olli Rehn said.

Private bondholders want others who bought bonds, and in particular the ECB which is Athens' single biggest creditor, to take part in a swap deal where existing bonds are exchanged for new paper offering far lower returns.

"We are ready to make an effort if everyone else (including the ECB) makes an effort," a source close to the talks said.

The interest rate, or coupon, on the new bonds has been the main stumbling block in the negotiations, with the IMF, Germany and other euro zone countries insisting it must be low enough to ensure that Greece's debt will fall to a still mighty 120 per cent of GDP by 2020, from around 160 now.

One source familiar with the negotiations said the "coupon is parked for current time until we can get closer on detail of the overall package". Asked if that would include the ECB, the source said: "We would expect it to, still to be determined though."

A second source close to the talks said the latest a deal could be clinched is a month before €14.5 billion of bond redemptions fall due on March 20, i.e., in just over three weeks.

If a deal is not reached by then, Greece could sink into an uncontrolled default that would trigger a banking crisis spreading contagion through the euro zone.

Greek bankers and government officials said they had not heard of any new proposal from the creditors' negotiators, after local media reported they were willing to improve their "final offer" of a 4 per cent interest rate on the new bonds to about 3.75 per cent.

One Greek daily, Kerdos, said participation of public sector creditors including the ECB in the swap deal was a pre-condition for that offer.

"Until last week, we knew that the steering committee was authorised to concede up to 3.8 per cent for the average coupon," one senior Greek banker told Reuters.

"But things are once again up in the air. You have to deal with politicians and 15 different governments asking for different things. We haven't got anything clear from the IIF yet, discussions start today."

Euro zone ministers rejected on Monday the creditors' offer of a 4 per cent coupon on new bonds, increasing the chance that Athens would have to enforce losses. Greece and its EU/IMF lenders were holding out for a 3.5 per cent interest rate.

Reuters