NEWS

Gov't spokesman warns of tough negotiations ahead

With Greece bracing for another tough year, the government spokesman on Monday warned of tough negotiations with foreign creditors to secure the necessary funds to keep the debt-wracked nation afloat.

?The danger for Greece is not yet over and the Papademos administration cannot afford to postpone the issues it has committed to,? Pantelis Kapsis told Skai television on Monday in reference to the crisis coalition government led by former central banker Lucas Papademos.

Negotiations with Greece's international lenders will be ?extremely difficult,? warned Kapsis, adding that the government would seek to prepare the people ahead of any fresh measures by ?building a climate of confidence.?

The government is looking at a tight schedule until March, when Greece will face bond redemptions of 14.5 billion euros. In order to pay investors, Athens will have to borrow the money from the European Union and the International Monetary Fund, as part of the 130-billion-euro bailout package that is currently being discussed.

However, to secure more emergency loans, Greece will have to achieve an agreement with private bondholders to accept at least a 50 percent haircut and to convince the EU and the IMF that it is progressing with the structural reforms it has promised.

IMF sources on Sunday warned that the 50 percent haircut being negotiated by the provisional government would not be enough. Sources at the Washington-based fund told Sunday?s Kathimerini that a number of alternatives, including a bigger writedown, are being examined. Other options include a purchase by the European Central Bank of Greek bonds on the secondary market or better terms on eurozone loans for Greece.

Meanwhile, the Papademos administration has to set out fiscal measures worth an extra 2 billion. It also has to make further cuts to pensions, benefits and public sector staff, as well as completing an overhaul of the country?s taxation system. EU and IMF officials are due in Athens on January 16 for their latest inspection on Greece?s progress.

While stressing that the ministers involved in the three-party coalition are not guided by partisan politics, Kapsis suggested that ongoing speculation inside PASOK regarding the succession of former Prime Minister George Papandreou at the helm of the Socialist party could be impacting on the coalition's performance.

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