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Greece hopes for debt relief deal "very soon"

By Nicholas Paphitis

Associated Press

Published: Friday, Jan. 20 2012 6:17 a.m. MST

ATHENS, Greece — Greece is confident a debt relief deal with private creditors that is crucial to avoid default can be reached "very soon," a government spokesman said Friday.

Prime Minister Lucas Papademos met for a third day with negotiators from the Institute of International Finance, which represents the private creditors who are being asked to take a loss on their bondholdings to lighten Greece's debt load by €100 billion ($129 billion).

"The atmosphere of the talks is good, they are continuing today and we hope they will be concluded very soon," government spokesman Pantelis Kapsis told private Radio 9.

"This is very important for the sustainability of the national debt and our ability to handle the debt."

Papademos was joined by Finance Minister Evangelos Venizelos at a 90-minute meeting Friday with top IIF officials Charles Dallara and Jean Lemierre.

Venizelos told reporters the talks would resume at 7:30 p.m. (1730 GMT) following an afternoon tele-conference with eurozone officials.

An agreement is needed if Greece is to get the next batch of bailout cash that would prevent a devastating debt default — Greece does not have enough money to cover a €14.5 billion bond repayment in March.

The bond-swap deal is part of a second bailout agreed by eurozone countries, worth €130 billion ($168 billion) in loans and support for banks.

Under the proposed deal, private creditors would cancel 50 percent of their Greek debt in exchange of a cash payment and new bonds with a longer maturity.

But the negotiations stalled last week over a disagreement on the interest rate those new bonds would have.

The two sides are now considering a proposal to set an interest rate of below 4 percent that would gradually increase until 2020, according to European officials.

Louka Katseli, a minister in the previous Socialist government, said the talks were being complicated by the involvement of a large number of parties with a stake in the debt deal.

"This does not only involve Greece and the creditors," Katseli told private Skai television.

Heavily involved behind the scenes are countries like Germany, which is paying the bulk of Greece's rescue loans, and the IMF, which is also involved in the bailouts. There are also the individual bond holders, like hedge funds which have bought Greek bonds but at the same time also hold default insurance, Katseli said.

Also Friday, international debt inspectors arrived in Athens to assess whether Greece is doing enough to get more bailout cash.

Officials from the European Union, the European Central Bank and the International Monetary Fund met with Venizelos. They will scrutinize Greece's public finances to make sure it is on track with painful austerity reforms needed to keep tapping rescue loans.

Near-bankrupt Greece has been surviving on a €110 billion ($142.02 billion) rescue loan program from European countries and the IMF since May, 2010, but required additional help to meet its funding needs.

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