Greece and its private creditors say they have made progress during talks in Athens on a debt-swap accord needed to lower the country's borrowings and clear the way for a second round of international aid.
"The elements of an unprecedented voluntary private-sector involvement are coming into place," said Charles Dallara, managing director of the Institute of International Finance, a Washington-based lobby group representing creditors negotiating with the Government.
European officials and the nation's private bondholders agreed in October to implement a 50 per cent cut in the face value of just more than €200 billion ($320 billion) of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece's borrowings to 120 per cent of gross domestic product by 2020.
An accord with bondholders is key to a second financing package for the cash-strapped country, which faces a €14.5 billion bond payment on March 20.
"Now is the time to ... finalise this historic deal and contribute to the economic stability of Greece, the euro area and the world economy," Dallara said in a joint statement with Jean Lemierre, a special adviser to the chairman of BNP Paribas.
A 4-hour meeting with Institute officials and Prime Minister Lucas Papademos broke up about 1 am local time on Saturday in Athens.
The two sides were in contact by telephone later in the day, said a Greek finance ministry official.
An institute steering committee team of experts was in Athens and working with the Government toward an agreement, he said.
The parties were nearing an agreement under which old bonds would be swapped for new securities with coupons averaging between 4 per cent and 4.5 per cent, said a person with knowledge of the discussions.
Unresolved issues remained, such as whether private investors would be treated differently from official creditors in the event of a later default, said the person, who declined to be identified because the talks were confidential.
The objective is to reach a deal by today, the person said, when finance ministers from the eurozone meet.
The two sides have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors.
The Financial Times, citing people close to the discussions, reported that officials from the European Commission, European Central Bank and International Monetary Fund (IMF) called for an interest rate averaging 3.5 per cent on new bonds after private bondholders had already agreed on a 4 per cent coupon.
The Wall Street Journal, citing a person with direct knowledge of the talks, said yesterday that discussions may have stalled again as the IMF and Germany pushed for an average coupon of less than 4 per cent on the new bonds.
Institute spokesman Frank Vogl denied that talks had broken off.
Dallara and Lemierre are "fully available to the Greek government's leadership by telephone should this be necessary," he said.