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Greece, creditors strive to avoid default

01-21-2012 11:00 BJT

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Greece has resumed negotiations with its private creditors. The third day of talks come after what the Greek Finance Minister, calls "long and substantial" discussions on Thursday. Evangelos Venizelos says the talks were held in a positive climate, suggesting that the two sides are inching ever-closer to a long-awaited deal. That deal, of course, is a prerequisite for a second financing package for Greece. And most critically, it’s key to avoiding a Greek default, as the country faces a 14-and-a-half billion euro bond payment on March 20th. Xia Cheng takes a look at some of the questions that still remain unanswered.

Greece has made progress in crucial negotiations this week, stretching the talks into the third day on Friday. The government wants to swap out that maturing debt for new, lower-yielding bonds and a small cash payment, but that lead to the break-down of conversations last Friday.

Greek Finance Minister, Evangelos Venizelos, says the mood of the talks is good. And the Institute of International Finance, which represents the bondholders, says the two hours of discussions were productive.

European officials and Greek’s private creditors agreed back in October last year, to push through a 50 percent haircut on the face value of Greek debt by voluntarily exchanging outstanding bonds for new securities. The goal is to reduce Greece’s borrowings to 120 percent of GDP by 2020. An accord with bondholders is now critical to the release of a second cash package for the country.

Aggelos Tsakanikas, head of Foundation for Economic and Industrial Research said: "Certainly we will have an agreement and the extent and all the details of this agreement will determine whether the markets will take this as a good signal or a bad signal. But it is an important dimension of the negotiation and it is important for the trajectory of the Greek debt because we have to reduce our debt in a way and this is something that is very important for the Greek economy."

Senior members of the EU-IMF debt inspection team, known as the "troika", are heading to Athens on Friday to negotiate additional terms for the second bailout and to monitor Greece’s progress on slashing deficits through harsh austerity measures.

But without a deal with private bondholders, the EU and IMF have warned they will consider that Greek debt is not back on a sustainable track and will not release further aid.

Some experts warn, if Greece does not receive the rescue loans it risks bankruptcy - possibly in a matter of weeks.

Professor Panos Tsakloglou from Athens University of Economics and Business said: "If we take into account the experience of several other countries that went bankrupt, social cohesion was really destroyed completely in the case of bankruptcy. I don’t mean that the situation is easy with the austerity measures. Anything but that. However I have a feeling that the current situation is just a children’s party in comparison to what we may anticipate in case of a bankruptcy."

So far most austerity measures have dealt with the public sector, but the troika has insisted a reduction in private sector wages would help competitiveness.

 

Editor:Zhang Rui |Source: CNTV.CN

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