Debt Inspectors In Athens As Bond Talks Continue

By Salon Staff

Published January 20, 2012 11:09AM (EST)

ATHENS, Greece (AP) — International debt inspectors arrived in Athens on Friday to assess whether Greece is doing enough to get crucial bailout cash, while talks with private creditors continued on a bond swap deal needed to avoid default.

Officials from the European Union, the European Central Bank and the International Monetary Fund met Friday with Finance Minister Evangelos Venizelos. They will scrutinize Greece's public finances to make sure it is on track with painful austerity reforms needed to keep tapping rescue loans.

Later in the day, Venizelos will start a third day of talks with private creditors, who are being asked to agree to a euro100 billion ($129 billion) writedown on their Greek bondholdings.

A deal is necessary if Greece is to get the next batch of bailout cash that would prevent a devastating debt default — Greece does not have enough money to cover a euro14.5 billion bond repayment in March.

Under the proposed deal, private creditors would cancel 50 percent of their Greek debt in exchange of a cash payment and new bonds with a longer maturity.

But the negotiations stalled last week over a disagreement on the interest rate those new bonds would have.

The two sides are now considering a proposal to set an interest rate of below 4 percent that would gradually increase until 2020, according to European officials.

Louka Katseli, a minister in the previous Socialist government, said the talks were being complicated by the involvement of a large number of parties with a stake in the debt deal.

"This does not only involve Greece and the creditors," Katseli told private Skai television.

Heavily involved behind the scenes are countries like Germany, which is paying the bulk of Greece's rescue loans, and the IMF, which is also involved in the bailouts. There are also the individual bond holders, like hedge funds which have bought Greek bonds but at the same time also hold default insurance, Katseli said.

Private creditors are being represented by Charles Dallara and Jean Lemierre, top officials at the New York-based Institute of International Finance.

Salon Staff

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