Fresh hopes over deal for Greek debt

Julian Harris
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HOPES of a deal to avoid a disorderly Greek default grew yesterday, as participants in crunch talks suggested a compromise was nearing.

Private holders of Greek government debt returned to the table in Athens, after discussions with Greek authorities broke down at the end of last week.

One source close to the talks said logic dictated that a deal will come together one way or the other and a banking source close to negotiations said it was imperative a deal over private sector involvement is reached by early next week at the latest.

“The only thing I can say at this stage is that we’re optimistic,” added a Greek government official who declined to be named.

Talks ground to a halt last week over the level of interest paid on new replacement bonds. Private holders are pushing for a higher rate of return in order to mitigate losses imposed through write-downs on existing debt.

The level of interest on new bonds was the most “visible” aspect of negotiations yesterday, an official confirmed. Greek finance minister Evangelos Venizelos added that talks were at a “sensitive” point.

“In the end, something is likely to be agreed partly because no side is going to want to see a disorderly default,” said Ben May, economist at Capital Economics.

“A lot of what’s been going on is manoeuvring from both sides to get a better deal. There’s likely to be an element of brinkmanship taking place from both sides in order to get the best terms.”

•Portuguese authorities brushed off a recent credit rating downgrade to comfortably raise the maximum planned amount in yesterday’s debt auction. Portugal sold €2.5bn (£2.08bn) worth of short-term debt, consisting of three-month, six-month and 11-month bills. Yields on all three notes came in at under five per cent.