Greece close to debt swap deal

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Greece close to debt swap deal

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Greece says it has all but concluded a crucial debt relief deal with its private investors.

The agreement would see those investors swap their Greek government bonds for new ones of a lower value, with a longer repayment period at lower interest rates.

Finance Minister Evangelos Venizelos said now they focus on convincing the EU and the IMF they can deliver the promised spending cuts and reforms.

Failure to persuade lenders it can follow through on its pledges could put both the bond swap and the country’s latest bailout at risk.

“Without the new (bailout) programme we cannot have the necessary funding and the debt swap cannot be completed,” Venizelos told reporters.

“In the next few days, our country needs to take difficult decisions and to complete a gigantic effort which rewards the sacrifices, the achievements and the hopes of the Greek people.”

He reiterated that Athens is “one formal step away” from completing a deal with private bondholders to restructure 200 billion euros of Greek debt, and confirmed that talks on both the swap and the bailout were “converging” and “co-dependent”.

In the financial world, they hope this is the endgame. Dominic Johnson of Somerset Capital Management said: “Every month or so there was another treaty, there was another announcement, another haircut – it sounds like a giant barber shop quartet. And then the markets would rally and say phew, that’s the end of that one, let’s now concentrate on something more positive. And of course a few days, weeks, or months later the problems rear their heads again because the fundamentals are not there.”

The European Central Bank — which is part of the so called ‘Troika’ of inspectors who are holding Athen’s feet to the fire — underscored the stakes involved on Tuesday.

ECB Governing Council member Ewald Nowotny said whether Greece stays in the euro zone depended on its ability to push through those further austerity measures and deeper reforms.

Greece’s lenders have demanded it make extra spending cuts worth one percent of GDP – or just above two billion euros – this year, including big cuts in defence and health spending.

In a sign of the challenges the government faces in pushing those through, a Greek union official said the country’s major unions were gearing up for more anti-austerity protests next month after an early grace period for Papademos’s government.

Talks with the troika have struggled over further cuts in labour costs in the private sector, which Athens has resisted over fears they could deepen a brutal recession and impose additional hardship on the poor, Greek officials say.