Greece is close to a critical debt writedown with private creditors, its prime minister said Monday, before adding that abandoning the euro was “not an option” for the crisis-hit eurozone member.
“The discussions which are ongoing have I think helped us to reach a point, which is close to an agreement, but some further reflection is necessary on how to put all the elements together,” Lucas Papademos told CNBC television. He spoke three days after a group representing creditor banks said it had “paused” in its debt talks with Athens.
“There is a little pause in these discussions. But I’m confident that they will continue and we will reach an agreement that is mutually acceptable in time,” Papademos said in his first interview since taking office in November. On Friday, the Institute of International Finance said talks in Athens had failed to produce a “constructive consolidated response by all parties.”
“Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,” the IIF said.
Greek Finance Minister Evangelos Venizelos later told the Financial Times that the talks would “probably” resume in Athens on Wednesday. The proposed deal would see banks agree to a 50 percent reduction, or “haircut” on their Greek debt, which would cut about 100 billion euros ($127 billion) from Athens’ massive debt burden that currently exceeds 350 billion.
Media reports have said that private sector negotiators want the new bonds to pay interest of around five percent, whereas Greek officials are only willing to agree to around four percent. Failure to reach agreement on the debt writedown, which is also a condition for new eurozone loans for Greece, has raised the prospect of a disorderly default that would plunge the 17-nation eurozone deeper into crisis.
Athens is conducting a separate negotiation with the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) on the details of a rescue package worth 130 billion euros that was decided in October. The country faces debt repayments worth more than 14 billion euros in March that it cannot meet without financial assistance.
“The two processes will have, this is the aim, to be completed over the next two to three weeks,” Papademos noted. The PM, a former ECB vice president, said the crisis-hit eurozone nation stood a much better chance of enacting tough reforms necessary for its economic recovery under the protection of the single currency.
“I think it’s often discussed that leaving the euro is an option for Greece. I think this is really not an option,” Lucas Papademos told CNBC. Officials from the EU Commission, ECB and IMF, known collectively as the ‘troika’, are due back in Athens later this week to assess Greece’s efforts in reducing its deficit and launching structural reforms.
