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Significant progress is noted in the negotiations between Greek authorities and banks in connection with the programmeme for the exchange of bonds, as the authorities demonstrate a willingness to seek ways to improve the quality of new securities.

The Institute of International Finance (IIF) mentioned yesterday of "progress" in negotiations with Greece for the remission of 50 percent of the external debt held by private creditors. "The negotiations in Paris have made progress", reports an IIF announcement, which represents private creditors.

"The private sector welcomes the authorities' willingness to work on ways to improve the quality of the debt exchange. Progress has been made and both sides agreed to continue their efforts in finding a voluntary solution", added experts from the Institute.

During a summit in Brussels in late October the IIF agreed with leaders of the eurozone for the exchange of old bonds with new ones. Eleven financial and credit institutions have representatives in the standing committee, which has assumed the negotiations.

Recently, in a statement the IIF head, Charles Dallara, left open the possibility for the contract for exchange to provide for equal treatment of private banks and international creditors in Greece, as contributions to the new bonds that must be paid simultaneously with the payment of interest on loans.

Athanasios Orfanidis from the European Central Bank mentioned the exchange programmeme for Greek bonds exchange. According to him last week’s decision of the European leaders not to provide for the involvement of the private sector in future rescue packages is positive, but the words must be accompanied by deeds.

"Markets were not convinced... In order to restore investor confidence, words must be accompanied by deeds", said from Florence Mr Orfanidis.

Uncertainty

On Tuesday a member of the Troika expressed his concern over the success and the voluntary nature of PSI, as well as over the fate of the loan agreement, stressing that this is a prerequisite for the progress of reforms, which are either late or are done on false grounds, such as with the labour reserve.

The bond exchange meetings continued yesterday in Paris and they were held between the Agency for debt management and representatives of banks, and according to sources there is progress, but still there is not a particular development in this direction.

Both the Ministry of Finance and the banks are under pressure to complete the programmeme for bond exchange, because not addressing this issue is fraught with danger for both sides, and there is also the problem with the differences on the issue of the interest rates of the new bonds. Banks insist on levels near 8 percent, in order to limit losses in their wallets and Greek authorities put a ceiling of 5 percent, in order to reduce interest costs over the coming years.

Senior Troika representative told Reuters that "talks for the voluntary exchange programmeme for Greek bonds are progressing, but there is no guarantee that they will lead to a voluntary agreement with the high rate of participation of private bondholders."

On the question concerning the possibility of sudden bankruptcy of Greece and how it is possible, he replied that "our goal remains for the programme to be of voluntary nature. If you ask me whether there is a guarantee that the exchange will be voluntary, I will tell you: "Of course, nothing is guaranteed".

Regarding the new loan agreement and Greek expectations for receiving 90 billion euros in early 2012, of which 30 billion for recapitalization of banks and 30 billion for encouraging bondholders to participate in the PSI, as well as capital repayment of debt, the senior representative of the Troika acted reserved.

Initially he refused to confirm the actual amount, noting that Greece must speed up reforms and should not take the new aid for granted. As he noted, "the Member States of the European Union and International Monetary Fund are not willing to give Greece such a huge sum, amounting to tens of billions, if they are first not convinced that the money will be used as intended", and added: "It is very important for the Greek authorities to understand this."

He noted however, that the goal of the Troika is for the talks with the Greek government for the new loan agreement to end during their next visit, scheduled for mid-January.

New auction of quarterly interest policies

The collection of 1.6 billion euros targets the issuance of quarterly interest bonds during next week, when the pressure of the markets will be stronger under the weight of the uncertainty created by lowering the rating of banks and Eurozone countries.

In particular on Tuesday, 20 December, the Agency for government debt management plans a tender for the bonds with interest of 13 weeks for 1 billion euros. By accepting also non-competitive bids (60 percent of the original amount), the total amount expected to be collected reaches 1.6 billion euros.

As for the interest rate, despite the crisis and pressure of the markets, the interest of the Greek policies is resistant.

During the two previous issues in November and October the interest rates were of 4.63 percent and 4.61 percent respectively.

Along with the tender the Ministry of Finance provides the opportunity for individuals (private investors) to acquire those securities exempt of income, provided that they will hold them until maturity and that they acquire them: