Greece pushes for debt deal as Italy unleashes reforms

ATHENS, Jan 20, 2012 (AFP) - Greece raced Friday to clinch debt and bailout funding deals as Italy was set to launch a vast programme of liberalisation reforms aimed at breathing new life into the economy.

Greek Prime Minister Lucas Papademos was scheduled to meet again with global bank group representatives after late-night talks on Thursday as his finance minister held discussions with senior EUIMF auditors on a new eurozone rescue loan.

Greece is seeking to slash around 100 billion euros ($129 billion) from its huge debt through a voluntary bond swap with creditors, a process that would unlock a new eurozone rescue package worth 130 billion euros overall.

The International Institute of Finance, a group representing around 450 financial institutions worldwide, on Thursday said “progress” had been made and that discussions will continue again on Friday.

Under the so-called private-sector initiative (PSI), banks and other financial institutions are expected to take at least a 50 percent “haircut” on their Greek debt, which would remove about 100 billion euros from Athens' massive debt burden of more than 350 billion euros.

The talks have hinged on the interest rate to be offered for new bonds which will replace maturing debt that is being erased.

A deal seems close on a flexible rate of around four percent, Greek newspapers said on Friday.

In a sign that an agreement is at hand, the International Monetary Fund on Thursday said it was ready for talks on extra rescue funds needed to keep Athens from defaulting in March.

The IMF was not originally part of the eurozone bailout agreed in October.

Greece wants an outline of the deal to be ready by Monday, and a full agreement by January 30 when the European Union is scheduled to hold a summit.

It has a looming loan repayment worth 14.3 billion euros on March 20 which it cannot honour without financial assistance.

The Friday meetings with senior representatives from the European Union, the IMF and the European Central Bank -- known locally as the 'troika' -- will focus on the next three years of an economic blueprint adopted by Greece in return for the 130-billion-euro eurozone bailout, and an earlier loan in May 2010.