Talks on Greek debt relief reopen

EUROZONE POLICYMAKERS are preparing to review the size and terms of the €130 billion rescue package for Greece agreed last year, depending on the outcome of the talks with private creditors over Greek debt relief which reopened in Athens yesterday.

Lucas Papademos, Greek premier, and Evangelos Venizelos, finance minister, were due to hold talks last night on an updated debt restructuring proposal by representatives of holders of some €200 billion of Greek bonds, amid rising optimism that a deal could be reached ahead of Monday’s European Union summit.

According to people with knowledge of the proposal, the co-heads of the bondholders’ committee negotiating with Greece, Charles Dallara and Jean Lemierre, could make concessions on interest rates for new bonds that would mean higher losses for private investors, but which could be recouped if the country returns to strong growth.

A lower interest rate on long-term bonds would allow Greece to reduce its ratio of debt to gross domestic product from 160 to 120 by 2020, making its debt viable, according to the International Monetary Fund. But it would also impose net present value losses above the 70 per cent previous ceiling set by private investors.

One Athens banker said: “An agreement that bondholders could accept appears close, provided the extra official funding comes through.”

In Berlin, Angela Merkel, the German chancellor, said the Greek talks were “on quite a good path”, but warned Greece would have to spell out “its additional obligations” before any deal could be done.

Officials in Berlin say that European leaders will need a full report by the “troika” officials representing the IMF, the European Commission and the European Central Bank before finalising the rescue. They doubted the report would be ready for Monday’s summit. – (Copyright The Financial Times Limited)