Greece Falters in Debt Talks with Creditors

Louise Armitstead, The Telegraph

February 5, 2012

The Greek prime minister has failed to secure a bondholder agreement despite appealing for help from the bosses of the International Monetary Fund (IMF) and the European Central Bank (ECB) to help break the dangerous deadlock.

Lucas Papademos held emergency telephone talks with Christine Lagarde and Mario Draghi today in a bid to find a way to meet the demands of both Greece’s private creditor banks and its “troika” paymasters.

Evangelos Venizelos, the Greek finance minister, told reporters he hoped to announce a deal this evening to avoid rattling global stockmarkets. However, he added: “It’s not an impasse but there are problems for the Greek side.”

There are just six weeks left before Greece faces a €14.5bn (£12bn) bond repayment which it cannot meet without international aid. European leaders have said Greece will not receive funds from the €130bn rescue package unless it can persuade its private creditors to take losses to reduce the country’s debt pile.


Sources close to the private creditors told The Daily Telegraph that an agreement was still “some way off”. Although the banks have in principle agreed to take a 50pc loss on their bonds and an artificially low coupon on new Greek debt, the process is complicated by the demands of international officials on the country’s budget.

Sources said the “focus” of the talks remained stuck on troika demands that include a 25pc reduction in the minimum wage and tougher public sector spending and job cuts.

Last week there were warnings that traders could react badly if there was no agreement on a voluntary debt rescheduling for Greece by the time markets open this morning.

Josef Ackermann, chief executive of Deutsche Bank, warned at a conference that a failure to agree could open “a new Pandora’s box” in the eurozone crisis.

At the weekend, Jean Claude Juncker, chairman of the Eurogroup of eurozone finance ministers, said a disorderly Greek default could not be ruled out. He told Der Spiegel, that without an agreement “in March they have to declare bankruptcy”.

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