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Greece to resume debt talks

Finance minister Evangelos Venizelos said talks will resume in coming days hoping to have outline agreed before next euro-group meeting on 23 January

Greece faces its most difficult challenge since the second world war after the unexpected collapse of talks over a debt swap deal with its private creditors on Friday, the country’s finance minister said at the weekend.

As Athens prepared to salvage nearly three months of negotiations, Evangelos Venizelos said time was of the essence if the debt-stricken nation was to win “this battle”.

“It is no exaggeration to say that the next three months will be more challenging than any other period since the second world war,” he told a conference of the socialist Pasok party, which navigated the crisis until its fall from government last November.

“Our interlocutors from the IIF [Institute of International Finance] will return on Wednesday and our goal is to have the general format agreed upon before the next euro group meeting on 23 January.”

Discussions over the deal – key to keeping default at bay and unlocking a second €130bn (£108bn) aid package for Greece – stalled when it became apparent that neither side could bridge their differences over interest rates on the new bonds. The accord aims to slice €100bn from Athens’ increasingly unsustainable debt pile by inducing private investors that include banks and insurers to voluntarily accept 50% losses in the value of their Greek government holdings.

The German foreign minister, Guido Westerwelle, visiting Athens on Sunday for talks with Prime Minister Lucas Papademos, also emphasised the significance of the need to hammer out a deal in what is set to be the most crucial week yet for the country where the crisis began.

With Berlin taking the lead EU role in bankrolling the rescue loans to Greece, Westerwelle’s spokesman said: “The foreign minister is travelling with a message of encouragement and expectation. Encouragement because … we want to embolden the Greek government to implement the reform steps it has announced and expectation because we want them to implement them.”

Greece’s interim coalition led by Papademos, a former vice-president of the European Central Bank, has been heavily criticised by the EU, IMF and ECB – the “troika” of bodies sponsoring the bailout programs keeping it afloat – for failing to implement the draconian economic reforms to make its economy competitive. Troika inspectors tasked with evaluating the near-bankrupt country’s fiscal progress are due to arrive in the capital on Tuesday.

Athens has so far received €110bn in rescue funds originally agreed as part of the biggest bailout in western history in May 2010.

The disbursement of further funds will depend on whether monitors decree that the country has made the grade – a job made more difficult by the credit rating downgrading of countries such as France that have played a huge role in propping up Greece, the eurozone’s most troubled member.

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