Greece Has Week for Debt Deal, Political Pledges, Venizelos Says

Greece must wrap up debt-swap talks with private creditors and renew pledges to overhaul the economy over the next week to keep international aid flowing, Finance Minister Evangelos Venizelos said.

The Greek government intends to complete by Feb. 1 the negotiations on a voluntary bond exchange meant to lessen the country’s debt burden, Venizelos said. New pledges demanded by the euro area from Greece’s political parties to curb public spending and bolster the economy should be made by a Jan. 30 European Union summit, he told reporters today in Brussels.

“We are entering the final stretch,” Venizelos said. “This is of vital importance not only for us but also for the whole euro area and for the world economy.”

Almost two years after an initial international rescue of Greece, a plan for 130 billion euros ($169 billion) in extra aid risks collapsing without an agreement on 50 percent losses for private holders of Greek bonds and without new pledges from the country’s political class to pursue long-term fiscal austerity and economic deregulation.

Greece, which faces a 14.5 billion-euro bond payment on March 20, is seeking to enact an October accord that foresees a 50 percent cut in the face value of more than 200 billion euros of Greek debt through a voluntary exchange of outstanding bonds for new securities. The goal is to reduce Greece’s debt burden to 120 percent of gross domestic product in 2020.

Ministers Balk at Bid

Euro-area finance chiefs yesterday balked at a bid by investors for an average 4 percent interest rate on new Greek bonds and are instead seeking coupons below 3.5 percent for debt to be serviced until 2020 and below 4 percent over the 30 years of the next Greek package.

“The interest rate on the coupons of the new bonds is a critical factor,” said Venizelos. A formal debt-swap offer is due by Feb. 13, he said.

The euro area’s demands for more proof of Greek politicians’ commitment to economic change echo tensions late last year over Greece’s respect for aid conditions.

In November, the euro area froze a sixth disbursement of loans to Greece under the initial, fully taxpayer-funded rescue of 110 billion euros until eliciting budget-austerity pledges from Greek political leaders backing the current unity government of Lucas Papademos, a former European Central Bank vice president. The region’s finance chiefs eventually gave the green light for the 5.8 billion-euro payment on Nov. 29.

‘A Bit Skeptical’

“I am a bit skeptical with regard to the implementation in Greece of reforms that should bring growth,” Austrian Finance Minister Maria Fekter told reporters today in Brussels before a meeting with her EU counterparts. “The political level in Greece must know that we expect that they do more. We are not satisfied.”

Venizelos said the Papademos government, which is backed by three parties, provides the “best circumstances” for Greece’s political leaders to commit again to policy changes needed for further aid.

“This is the hour of pledges for all the parties,” he said. “Nobody can hide behind another.”

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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