Greek debt swap talks suspended


Greece’s government says that negotiations with private creditors aimed at lightening Greece’s debt load have been suspended unexpectedly and that the creditors’ representative has left Greece.

Prime minister Lucas Papademos, along with finance minister Evangelos Venizelos, had
met private creditors’ representative Charles Dallara, managing director of the Institute of
International Finance, for more than four hours yesterday, with the talks continuing past

A spokesman for Mr Papademos said today that no new date for the talks has been set.

At issue is the interest rate in an eventual bond swap, which could lighten Greece’s debt
burden by as much as €100 billion.

Athens had been anxious to strike a deal before a meeting on Monday of euro zone finance ministers, just in time to set in motion the paperwork and approvals necessary to receive a new injection of aid to avoid a messy bankruptcy in March.

"The elements of an unprecedented voluntary PSI are coming into place," the Institute of International Finance (IIF) said in a statement after yesterday's three-hour evening negotiation session, referring to the bond swap scheme.

"Now is the time to act decisively and seize the opportunity to finalise this historic deal and contribute to the economic stability of Greece, the euro area and the world economy."

The statement seemed to be addressing Greece's official lenders, the EU and the IMF, who have driven a hard bargain behind the scenes of the negotiations, insisting that the deal must slash Greece's debt substantially, sources in Athens said.

Private bondholders will likely take a hit of 65 to 70 per cent on their holdings, with Greece's new bonds featuring 30-year maturity and a progressive coupon, or interest rate, averaging out at 4 per cent, another banking official close to the talks said.

A 15 per cent cash sweetener will be made up of short-term bonds from Europe's temporary bailout fund, the European Financial Stability Facility (EFSF), two sources said.

"It will be near cash-equivalent short-term EFSF bonds," one of the sources said.