Creditors in a $23b sweat over Greece

Greece must urgently break a deadlock in debt swap talks triggered by ‘‘unreasonable’’ demands from its partners, the head of a group of representing its private sector warned, as Athens raced against the clock to prevent an unruly default.

Barely a month after an injection of bailout funds helped to 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 Greece needs a deal with the private sector within days to avoid going bankrupt when 14.5 billion (NZ$23.11B) of bond redemptions fall due in late March.

But talks with its creditor banks broke down at the weekend over the interest rate on new bonds Greece will offer and a plan to enforce investor losses.

Negotiations were suspended until Thursday and Greece sent senior officials to Washington to consult the International Monetary Fund.

With a growing number of experts – including a senior Standard & Poor’s official – warning that a Greek default was on the cards, the country’s creditors expressed alarm.

‘‘There is an urgent need for agreement to inject an element of stability,’’ Charles Dallara, head of the Institute of International Finance who represents Greece’s private creditors, said.

Banks were ‘‘very surprised’’ at ‘‘completely unreasonable’’ interest rates offered to them, Dallara said. 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.’’

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