Greece Upbeat Ahead Of Debt Inspectors'
Return.
by Derek
Gatopoulos And Elena Becatoros(AP and OfficialWire)ATHENS (GREECE)
Greece is
gearing up for another tough week of negotiations on the country's crucial
second bailout as it tries to revive talks with private investors and has
its economy scrutinized by a team of international debt inspectors.
Government
spokesman Pantelis Kapsis said Monday: "This is a critical time for
the Greek economy ... the negotiations are very difficult."
"It is
understood that there will be renewed pressure (from the debt inspectors)
to speed up structural reforms."
The mission
heads of inspectors from the so-called "troika" — the
International Monetary Fund, European Central Bank and European Commission
— are expected to arrive next week. The technical teams, meanwhile, will
begin work in Athens Tuesday, the same time Horst Reichenbach, the
European Commission's task force chief for Greece, is also due for a
four-day visit.
An integral
part of the €130 billion ($166 billion) second bailout is a bond swap
deal with private creditors that is crucial to avoid a devastating
default. But those talks appeared close to collapse Friday amid
disagreements over the interest rates of the new bonds. The negotiations
are expected to resume this week, probably Wednesday.
Known as the
Private Sector Involvement, or PSI, the talks aim to reduce Greece's debt
by €100 billion ($127.8 billion) by swapping private creditors' bonds
with new ones with a 50 percent lower face value. Without it, the country
could suffer a catastrophic bankruptcy that would send shock waves through
the global economy.
"Despite
the difficulties, there is optimism for the outcome" of the second
bailout deal, Kapsis said.
Charles
Dallara and Jean Lemierre of the Institute of International Finance, a
global body representing the private bondholders, met in Athens last week
with Prime Minister Lucas Papademos and Finance Minister Evangelos
Venizelos, but the talks were suspended on Friday, with the IIF saying
that despite Greek efforts, there had not been "a constructive
consolidated response by all parties."
People
familiar with the talks said that while a deal appeared close last
Thursday, a problem arose Thursday night over the interest rate the new
bonds would have, with the International Monetary Fund and Germany seeking
a coupon rate below 3 percent — a very low rate for bonds that are paid
off in 20 to 30 years' time.
The people
spoke on condition of anonymity to disclose details of the highly
sensitive negotiations.
An interest
rate that is that low is unlikely to be accepted by the banks and
investment funds holding government bonds — a crucial issue as the bond
swap must be voluntary if the deal is not to be considered a "credit
event" that could trigger the payment credit default swaps —
essentially insurance against a default.
Greece is
running out of time to clinch a deal, as it faces a massive €14.5
billion bond redemption on March 20 that it cannot afford to pay.
The second
bailout comes on top of a first, €110 billion rescue package that Greece
has been relying on since May 2010, after years of overspending and waste
left it facing an untenable public debt.
