Banks warn time running out for deal on Greek debt writedown

Jan 12, 2012, 16:54 GMT

Brussels - Private holders of Greek bonds negotiating a debt writedown with the government said on Thursday that major sticking points remained, warning that time was running out to strike a deal.

'It is essential in order to finalize the voluntary ... agreement that support be given by all official parties in the days ahead,' the Institute of International Finance (IIF) said in a statement. 'Time for reaching an agreement is running short,' added the IIF, which is representing the lenders.

The comments came three days after German Chancellor Angela Merkel warned that the lack of an agreement could block the disbursement of the country's next bailout tranche.

Athens is in line to receive 5 billion euros (6.4 billion dollars) in March under the seventh instalment of a 110-billion-euro rescue package it was awarded by the European Union, the European Central Bank and the International Monetary Fund in 2010.

Greece needs the money to help cover 14.4 billion euros it will have to shell out that same month as part of a scheduled debt repayment to bondholders.

An agreement on the debt writedown is also a precondition to finalizing Greece's second international bailout, which the country needs to remain solvent after the first rescue package runs out.

The negotiations aim at securing a writedown of at least 50 per cent.

The banks' negotiators, Charles Dallara of the IIF and Jean Lemierre of the BNP Paribas banking group, held talks with Greek Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos on Thursday.

'A range of issues were discussed and some key areas remain unresolved,' the IIF statement noted. 'Discussions will continue in Athens tomorrow.'

Greece is also bracing for a visit next week by experts from the EU, the European Central Bank and the International Monetary Fund, who will assess whether Athens has made enough reform and austerity progress to qualify for the new tranche under its bailout conditions.

The so-called troika team is expected to start its work in Athens on Tuesday, a European Commission spokesman said.

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