A crucial marathon dialogue between the Greek government and private creditors in Athens over a Greek debt write-down deal as part of international efforts to stave off a default within the Eurozone failed to reach a solution over the weekend.
The Greek government initially sought to present a draft agreement with the leading negotiators of private banks and hedge funds holding Greek bonds on the planned swap of part of the Greek debt at the Eurozone Finance Ministers meeting in Brussels on Monday.
But the latest direct talks with the Institute of International Finance (IIF) Managing Director Charles Dallara held in Athens until early Saturday, and deliberations over the phone, as well as ongoing talks with a technical team of IIF which stayed at the Greek capital, had produced no concrete result until late Sunday.
According to the latest official statement by IIF released during the weekend, there had been made “substantial” progress until the departure of Dallara from Athens to Paris on Saturday, and “elements of a deal are coming into place.”
In a quote by phone to Greek television channel Ant1 on Sunday evening Dallara expressed confidence that a deal will be reached. “We are at a crossroads. I am optimistic,” he said.
But, citing Greek government sources, other Greek media reported in the weekend that the European Union counterparts and International Monetary Fund (IMF) creditors are not happy with the draft accord, expressing doubts whether it will secure the sustainability of the Greek debt.
According to the reports EU/IMF creditors supporting Athens with multi-billion euro rescue loans since 2010, press for a wider loss for the private sector.
Under the October 26 Eurozone agreement on a second EU/IMF aid package to debt-laden Greece, the Private Sector Involvement (PSI) in efforts to avert a Greek bankruptcy would lead to a 50% “haircut” on the value of Greek bonds held by private banks through a swap of old bonds for new 30-year ones with lower interest rates.
Under the PSI plan some 100 billion euros (129.32 billion US dollars) will be wiped from the over 360 billion euros Greek debt load that currently stands at around 160% of the Greek GDP. The aim is to reduce the figure to a “sustainable” 120% in 2020.
According to sources from both sides, over the past two weeks Greece and IIF have come close to striking a deal, while differences remain regarding the height of the interest rates. According to unconfirmed media reports, they are close to agreeing on an average 4% interest rate, but IMF and European counterparts press for a lower interest rate.
The PSI plan is regarded as a precondition for the release of a second EU/IMF aid package to Greece before March 20, when the country faces a 14.5 billion euros bond payment. Without international financing Greece could default and Eurozone face contagion. – BuaNews-Xinhua