Time running short for PSI deal, warns IIF

The time for a deal on the private sector involvement plan (PSI+) is running out while key areas remain unresolved, the Institute of International Finance (IIF) said on Thursday. IIF head Charles Dallara is currently in Athens to help seal an agreement as soon as possible, with the government expecting results by the end of next week.

Dallara met with Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos on Thursday and will hold talks with them again on Friday as the negotiations are reaching a crucial point. A senior Finance Ministry official said the outline of the deal may be ready in the next few days.

?We are totally on track and exploiting the momentum. By the end of next week, we could have the final outline for a deal with the private sector. By the beginning of February we may have the formal public offer,? the unidentified official told journalists.

The IIF, which represents the majority of private holders of Greek debt, issued a statement on Thursday, saying: ?A range of issues were discussed and some key areas remain unresolved. Discussions will continue in Athens [on Friday], but time for reaching an agreement is running short.?

Venizelos expressed reserved optimism, saying the talks are ?at a very good point,? after suggesting on Wednesday evening that he would have been happier if the issue of reducing public debt had been dealt with from spring 2010.

With the maturity period and the interest rate of the new bonds still being negotiated and the rate of participation by private bondholders still uncertain, the outcome of the talks remains unknown. Dallara is said to have asked for a coupon of more than 5 percent. Observers have not ruled out the possibility of forced participation that would trigger the payout of credit default swaps.

Deputy Finance Minister Filippos Sachinidis stated yesterday that if there is not full participation by private creditors, Greece would need additional international funding.

?If the participation level is below 100 percent, it is possible that additional support from our partners will be needed to cover the funding gaps,? he told Skai Radio on Thursday.

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