Eurozone finance ministers’ chief Jean-Claude Juncker says the interest rate on new Greek government bonds has to be lower than the 4 percent bondholders are demanding.
Juncker said Tuesday it is clear that Greece’s economic reform program is “off track.” He urged Greece to reach a deal with private investors within days.
Greece faces default when its bonds held by banks and other private investors come due in March. It has proposed swapping the old bonds for new ones at a 50 percent loss in value for the bondholders.
The investors are balking at EU finance ministers’ insistence that the interest rate on the new bonds be no higher than 3.5%.
The debt swap and lower interest rate could save Greece more than $129 billion, but negotiations have so far failed.
Greece is seeking a $168 billion bailout from the European Union and International Monetary Fund — its second bailout in two years. But European leaders say they will not approve the rescue package without a Greek deal on the private debt relief and more spending cuts and tax hikes, which have caused outrage from Greek citizens.