Greece expects details for bond swap deal in Jan

By Derek Gatopoulos

Associated Press

Published: Tuesday, Dec. 20 2011 12:00 p.m. MST

A ship is illuminated by a stream of sunlight breaking through clouds as it navigates the Saronic Gulf in Athens, Tuesday, Dec. 20, 2011. Negotiations with banks for a massive Greek bond swap deal are "going well" and a framework agreement is expected in early January, an official in the country's coalition government said Tuesday.

Petros Giannakouris, Associated Press

ATHENS, Greece — Negotiations with banks for a massive Greek bond swap deal are "going well" and a framework agreement is expected in early January, officials in the country's coalition government said Tuesday.

Finance Minister Evangelos said Greece is "close to an agreement" on the deal.

"I believe that, because I have a personal view of the negotiations and I know (an agreement) can be attained," Venizelos said.

Another government official, speaking on condition of anonymity because the talks are ongoing, said it was likely the outline of the deal will be settled early in January. Specific terms, including the participation rate of the banks involved, will be worked out later that month.

Banks and other private holders of Greek debt are negotiating a 50 percent write-down on the bonds. Their bonds will be replaced by new ones backed by a new European rescue fund.

The bond swap is a key part of second bailout deal for Greece agreed with eurozone countries. The struggling country remains frozen out of private bond markets and has relied since May 2010 on rescue loans totaling €110 billion ($143 billion) from European Union countries and the International Monetary Fund.

Greek officials insisted turmoil in Europe's financial markets will not affect the negotiations with banks about the bond swap, as some EU officials have warned.

Greece is still selling short-term debt to keep a presence in the markets — on Tuesday it raised €1.3 billion in a 13-week treasury bill auction, paying a yield of 4.68 percent, up slightly from a 4.63 rate paid last month.

Greece's coalition government, backed by the majority Socialists and main rival conservatives, was formed last month to push through a series of long-delayed reforms demanded by rescue creditors in return for a second bailout. They include a shake up of the tax system, judicial reform to reduce trial delays, and implementation of new market rules opening up traditionally restricted professions to more competition.

Officials in the new government have conceded that a tentative Feb. 19 date for general elections is likely to be delayed to sometime in the spring, given the number of reforms requiring parliamentary approval.

Two years of painful austerity measures have cut deep into Greeks' incomes, sparking a series of general strikes and often violent protests.

On Tuesday, about 1,000 members of a Communist party backed union held a peaceful protest march to the Labor Ministry in Athens.

Greece's debt crisis has hammered the country's private sector, pushing unemployment up to 17.7 percent in the third quarter of 2011. The main Athens stock index sank below 650 points in late trading Tuesday, its lowest level since 1992, before closing higher at 660.07. When the debt crisis began in 2009, the index was around 2,100 points.

Nicholas Paphitis contributed to this report.

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