Greek Prime Minister Lucas Papademos said on Monday he was confident a deal on a crucial debt swap plan would be reached in time, striking an optimistic tone despite mounting concern over Athens' race against the clock to avoid a disorderly default.
Athens needs a deal with the private sector, the EU and the IMF to avoid going bankrupt when a major bond redemption comes due in late March, but talks with its creditor banks broke down without an agreement on Friday.
“There is a little pause in these discussions. But I am confident that they will continue and we will reach an agreement that is mutually acceptable in time,” Papademos said according to a transcript of an interview with CNBC.
Under the bailout terms agreed in October, Greek privately held debt would be reduced by half, so that, together with structural reforms, the overall debt to GDP ratio of Greece would fall to 120 percent in 2020 from 160 percent now.
Inspectors from the EU, the IMF and the ECB, due in Athens on Tuesday for talks on a second, 130-billion-euro bailout, have warned they need the deal with the private sector to achieve that debt-reduction goal before they agree to give more aid.
Papademos said talks on these two processes must be completed over the next two to three weeks.
“This is the objective. I think the conditions are in place in order to do so,” Papademos told the broadcaster.
Charles Dallara, head of the Institute of International Finance who represents Greece's private creditors, told the Financial Times an agreement in principle was needed by the end of this week if it was to be finalised in time for the March bond redemptions and said the Greeks were not the problem.
“All the European heads of state said they wanted a deal with a 50 per cent (haircut) and a voluntary agreement,” Dallara was quoted as saying. “Some of their own collaborators are not following that decision.”
Greece, in its fifth year of recession, has continuously missed its fiscal targets, prompting speculation that the country may need further financial support to put its debt on viable footing.
Asked if Athens would need additional aid to that agreed at a euro zone summit in October, Papademos said this would not be necessary.
“I think the funds that have been pledged at the Euro Summit, combined with the outcome of the private sector involvement process should be sufficient in order to support financially the Greek economy,” Papademos said.
Uncertainty over fixing Greece's debt crisis is more of a threat to Europe's stability than the downgrade on Friday of nine euro zone countries' credit ratings by Standard & Poor's, British finance minister George Osborne said on Monday.
Bill Gross, the manager of the world's largest bond fund PIMCO, said in a twitter post that Standard & Poor's downgrade had made investors “aware” that countries can default and Greece would be the next example. - Reuters