Greece in frantic talks with IMF to break debt impasse

GREECE sent senior officials to Washington yesterday for meetings with the International Monetary Fund as it raced against the clock to break a deadlock in debt swap talks that has raised fears of an unruly default.

Barely a month after an injection of bailout funds helped avert bankruptcy, Greece is back at the centre of the eurozone crisis as fears of a default and a subsequent eurozone exit overshadow a mass credit downgrade of eurozone countries.

Cash-strapped Athens needs a deal with the private sector within days to avoid going bankrupt when €14.5 billion of bond redemptions fall due in late March.

But talks with its creditor banks broke down on Friday over the interest rate and a plan to enforce investor losses and are not expected to resume until tomorrow.

Greece put a brave face on the standoff.

“There is a little pause in these discussions,” Greek Prime Minister Lucas Papademos told CNBC television.

“But I am confident that they will continue and we will reach an agreement that is mutually acceptable in time.”

He expressed optimism that talks on both the debt swap and the latest bailout would be completed in two to three weeks.

But Athens is quickly running out of time on the bond-swap front. A deal must be sealed before senior inspectors from the EU, IMF and ECB troika arrive in Athens at the end of the week to agree details of a second, €130bn.

Furthermore, an agreement in principle is needed by the end of this week if it is to be finalised in time for the March bond redemptions, Charles Dallara, head of the Institute of International Finance who represents Greece’s private creditors, told the Financial Times.

Banking sources say Athens is not the problem in the talks, pointing the finger at terms insisted on by the troika of EU, ECB and IMF lenders keeping Greece afloat with aid.

In a bid to resolve the impasse, a government source said the head of Greece’s debt agency and a senior adviser were travelling yesterday to Washington to meet IMF officials just a day before a team of technical experts from the troika arrives in the Greek capital.

Under the bailout terms agreed in October, Greek privately held debt would be reduced by half so that, together with structural reforms, the overall debt-to-GDP ratio of Greece would fall to 120% in 2020 from 160% now.