Greece races for double debt deal in talks - The Best from Greece

Greece is racing today for a double debt-saving deal in parallel negotiations with private creditors and its EU-IMF bail-out partners ahead of a default deadline looming in March.

Prime Minister Lucas Papademos was scheduled to meet again with global bank group representatives after late-night talks last night as his finance minister held talks with senior EU-IMF auditors on a new euro zone rescue loan.

Greece is seeking to cut around €100 billion from its huge debt through a voluntary bond swap with creditors, a process that would unlock a new euro zone rescue package worth €130 billion overall.

The International Institute of Finance, a group representing around 450 financial institutions worldwide, yesterday said "progress" had been made and that discussions will continue again on Friday.

Under the so-called private-sector initiative (PSI), banks and other financial institutions are expected to take at least a 50% "haircut" on their Greek debt, which would remove about €100 billion from Athens's massive debt burden of more than €350 billion.

The talks have hinged on the interest rate to be offered for new bonds that will replace maturing debt that is being erased. A deal seems close on a flexible rate of around 4%, Greek newspapers said today.

In a sign that an agreement is at hand, the International Monetary Fund yesterday said it was ready for talks on extra rescue funds needed to keep Athens from defaulting in March. "The Greek authorities have requested to begin discussions on a new arrangement with the Fund," International Monetary Fund spokeswoman Conny Lotze said.

The IIF was represented by managing director Charles Dallara and Jean Lemierre, an adviser to French bank BNP Paribas. Greece wants an outline of the deal to be ready by Monday, and a full agreement by January 30 when the European Union is scheduled to hold a summit.

It has a looming loan repayment worth €14.3 billion on March 20 which it cannot honour without financial assistance. Hedge funds holding Greek debt have resisted the writedown.

Greece has warned it could take action on holdouts, a move that may trigger claims by creditors for default compensation from Athens.

"By next Monday, at the EU summit, we must have a final framework for the new loan programme, not just for the bond swap," Finance Minister Evangelos Venizelos told parliament yesterday.

The finance minister said Greece wanted a "radical and generous" debt cut of a voluntary nature, but noted that all bondholders had to participate for the operation to produce to achieve the 50% reduction in the value of the debt held by private creditors. "It must be of a voluntary nature, and lead to complete participation, namely 100% participation," the minister said.

A successful conclusion to the talks would also enable the stricken euro zone member to hold early elections, expected in April, to replace an uneasy political coalition supporting the present temporary government.

Today's meetings with senior representatives from the European Union, the IMF and the European Central Bank will focus on the next three years of an economic blueprint adopted by Greece in return for the €130 billion bail-out, and an earlier loan in May 2010.