?There were signs of optimism from both the Greek government and representatives of its private creditors that a deal might be reached soon on restructuring the nation's debt. The Greek government has been in negotiations with the Institute for International Finance (IIF), a Washington-based lobby organization that represents many global banks and financial institutions. Talks with the IIF, who is negotiating on behalf of Greece's private creditors, had stumbled recently, but seem to be revived with a new IIF proposal. Optimism was high enough to spark rallies in global financial markets, including a jump in the Athens stock exchange.
The key issue between Greece and its private creditors has been the future interest rate Greece would pay on the bonds held by these creditors. The interest rate directly impacts the total value of the bonds, so the amount by which the interest rates are reduced represents much of the loss the creditors will take.
The IIF wants the rates on the new bonds to be in the 4 to 5 percent range. However, the governments of many euro-zone countries, who have been and will likely continue to loan Greece money to get out of this crisis, want the interest rates to be considerably lower. The new proposal made by the IIF suggests an interest rate that will begin in the 3 percent range, but increase every two years.
Talks based on this proposal are set for Friday with the hopes of reaching a resolution before an important meeting next Monday of euro-zone finance ministers. The Friday talks with the IIF also coincide with other negotiations Greece will be having with the "troika" - the European Union, International Monetary Fund, and European Central Bank. These talks will focus on new potential loans to help Greece cover its financing costs. All talks are focused on preventing Greece from defaulting on a March due bond redemption.
