Dallara hardens stance on PSI

Dallara hardens stance on PSI 

Prospects for debt swap unclear after head of group representing bondholders sets limit

The prospects for talks between Greece and private investors holding Greek debt appeared unclear again late on Sunday as the head a steering committee representing the bondholders hardened his stance in negotiations.

As Finance Minister Evangelos Venizelos travels to Brussels on Monday for a Eurogroup summit where a second bailout for Greece had been due to be discussed, the comments by the head of the Institute of International Finance, Charles Dallara, have created fresh concern about the outlook of a crucial debt swap that must be sealed before further rescue aid will be released.

In an interview to private television channel Antenna aired on Sunday night, Dallara suggested that an average interest rate of between 3.8 and 4 percent being sought by private firms in the debt swap was the biggest concession that could be made.

“This is certainly the maximum offer that is consistent with the voluntary debt exchange,” Dallara told Antenna. He said the onus was now on the International Monetary Fund and the European Union, Greece’s official foreign creditors, to make a concession. “It is largely in the hands of the official sector to choose the path, a voluntary debt exchange or a default.”

He said he was “hopeful” a deal would be reached but added, “We remain at a crossroads.”

Meanwhile speculation peaked about the circumstances surrounding Dallara’s departure from Athens early on Saturday. The IIF said that Dallara’s departure had been planned and insisted that there had been no breakdown in talks on the debt swap, dubbed PSI for private sector involvement.

But Antenna quoted sources as saying that the IIF chief had met with officials of the French and German finance ministries at the Paris Club on Saturday night for a “secret dinner” where the Greek debt swap issue was allegedly discussed.

There was also much speculation over the weekend about austerity measures that the IMF, the European Commission and the European Central Bank -- known as the troika -- would demand from Greece in exchange for more rescue aid.

Kathimerini understands that the troika has some key demands. These include the closure of 100 state entities, resulting in some 10,000 layoffs; the trimming of the 13th and 14th salaries paid to workers in the private sector; cuts to auxiliary pensions and the full liberalization of all closed professions.