BRUSSELS ? Eurozone finance ministers set the stage for further tough negotiations with private bondholders over how to cut Greece's massive debt pile, by setting a low limit on the interest rate the country will have to pay on new lower-valued bonds.
Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said early Tuesday that the interest rate on the new bonds will have to average "clearly below 4 percent" over the lifetime of the bonds. In the period before 2020, the average interest rate will be less than 3.5 percent, he added.
Those caps are far below interest rates demanded by Greece's private creditors, who already have to give up on 50 percent of the face value of their investments and are expected to give the country between 20 or 30 years to repay them.
Time is running out for Greece to reduce its debt by some euro100 billion ($129 billion) and avoid missing a vital bond repayment deadline in March. Talks between the country and the creditors to secure a deal hit an impasse over the weekend.
By setting the low caps, the ministers made clear that they are not willing to increase their rescue loans to Athens beyond the euro130 billion tentatively agreed in October.
The tough negotiation stance will test the willingness of private creditors to voluntarily agree to the Greek debt relief. The alternative would be for the eurozone to force losses on the private bondholders ? a move that they have been reluctant to make.
A spokesman for in Institute of International Finance, which represents the private creditors, declined to comment on the announcement.
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