European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on a private-sector involvement in a Greek debt swap this month.
“The next three days will be very crucial for the future in three years,” he said at a panel debate at the World Economic Forum in Davos, Switzerland, today. “We’re just about to close a deal on private sector involvement between the Greek government and the private-sector community. Preferably, still in January rather than February.”
Greece and its creditors are haggling over the terms of an accord to reduce the country’s borrowings, three months after private bondholders agreed to a 50 percent cut in the face value of more than 200 billion euros ($263 billion) of debt by voluntarily swapping bonds for new securities. The aim is to reduce Greece’s debt burden to 120 percent of gross domestic product in 2020.
European leaders are pushing investors to accept bigger losses on their holdings on Greek government debt to avert a default. An accord is tied to a second bailout for the country, which faces a 14.5 billion-euro bond payment on March 20.
Greek Prime Minister Lucas Papademos will meet creditor representatives later today, according to his office. The meeting between Papademos and Charles Dallara, managing director of the Institute of International Finance, will be held at 6:30 p.m. Athens time, a spokeswoman from the premier’s office said today by telephone.
Papademos will also meet with Finance Minister Evangelos Venizelos and Bank of Greece Governor George Provopoulos at 12:30 p.m. Athens time, the spokeswoman said, declining to be named, in line with policy.
Greece’s private bondholders had made an offer that would lead to a loss of about 69 percent on the net-present value of Greek bonds, two people with knowledge of the talks said on Jan. 23. The new 30-year bonds would carry an average coupon of about 4.25 percent, said the people, who declined to be identified because the talks are private.
European finance ministers meeting in Brussels this week signaled they would push Greece’s private investors to accept bigger losses, with 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.
Dallara will make a proposal that the new bonds carry a weighted average coupon of 3.75 percent, Greek newspaper Kathimerini reported yesterday, without saying how it obtained the information.
“We need to have a sustainable solution for Greece,” Rehn said on the panel discussion with the French and German Finance ministers. The private sector involvement planned in the Greek rescue “won’t be applied to any other country of the euro zone.”
Rehn had said on Jan. 23 that talks with bondholders should conclude “shortly.” A deal could be reached over the weekend, if not today, he said at Davos today.
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