February 1, 2012
Greece's prime minister will call the country's political leaders in the next few days to seek backing for more austerity after the International Monetary Fund warned this was key to securing the new bailout Athens needs to avoid a messy default.
With a long-delayed deal with private sector creditors to cut Greece's debt mountain by 100 billion euros nearly wrapped up, the government is now racing to complete talks on the 130-billion euro ($170.18 billion) bailout by the end of the week.
To do so, Athens must first persuade the European Union and the IMF - which have grown increasingly exasperated with its repeated failures to meet deficit and reform targets - that it will implement long-delayed reforms and slash spending further.
Bankers said the bond swap deal, which will mean real losses of about 70 percent for Greek bond holders, is essentially done. But the second bailout and any official sector participation must be agreed before announcing a deal as all elements are interlinked.
"The PSI (private sector participation) deal has been done but we are waiting for the second bailout to come together and no announcements should be expected before Monday," said a senior Greek banker close to the negotiations. "The coupon is under 4 percent."
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