Confidence high on debt deal

Finance Minister Giorgos Papaconstantinou said on Wednesday he?s confident European leaders will forge a ?comprehensive? agreement next month to stem Europe?s debt crisis as Greek bond spreads fell to a six-month low.

?The current market situation is one of expectations,? Papaconstantinou told Bloomberg in an interview. ?It would be a big mistake to conclude an agreement that falls short of these expectations.?

A European Union summit in Brussels on Friday will ?point to the direction and give a timetable for the comprehensive package to be agreed upon? next month, he said.

The difference between the yield on Greece?s 10-year bond and comparable German debt fell to 760 basis points yesterday, the lowest in almost six months.

European leaders are seeking to advance a plan to strengthen the EU?s bailout mechanism in a bid to end the debt crisis that forced Greece and Ireland to seek emergency aid. Friday’s meeting will seek to keep markets at bay until a late-March deadline to bridge differences over budget rules, rescue loan rates and bond buybacks.

A pledge to allow Greece to stretch out the maturities of its 110-billion-euro bailout package, crafted before the EU forged its broader bailout fund, will ?very much help in assuaging these fears,? Papaconstantinou added.

A comprehensive package ?will soothe markets and bring down spreads throughout the periphery and thereby allow Greece to return to capital markets sooner rather than later.?

Meanwhile, at Friday’s summit Chancellor Angela Merkel is expected to link increasing German support for high-debt eurozone countries with sweeping structural and regulatory reforms in the currency bloc.

German Deputy Finance Minister Joerg Asmussen underscored again on Wednesday that revisions to the eurozone fiscal rescue mechanism would almost certainly require concessions from other governments.

Talks to change the scope and efficiency are ?not a one-way street,? Asmussen told reporters in Frankfurt.

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