Debt talks in Athens as MPs vote on government

The front man for global banks was in Athens on Wednesday for talks on reducing Greece's huge debt as parliament prepared to confirm a new unity government tasked with staving off bankruptcy. Charles Dallara, the managing director of the Institute of International Finance who is leading negotiations on a major Greek debt rollover, will meet Prime Minister Lucas Papademos and the finance minister, officials said. The talks will follow a vote of confidence on Papademos and the new government, formed last week after days of domestic and market turmoil as Greece's crippling debts sparked fears it may be forced to leave the eurozone. Papademos's office said he would meet Dallara around 8:00 pm (1800 GMT), while Finance Minister Evangelos Venizelos is expected to meet the banking chief some time after 3:00 pm (1300 GMT), a source in his office told AFP. Under a rescue deal agreed by eurozone leaders in October, banks are being asked to take a 50-percent loss on their Greek debt holdings by exchanging maturing paper with longer-dated bonds. But the details must still be hammered out and the negotiations are expected to continue in Frankfurt, where Dallara will meet leaders of financial institutions that hold Greek debt this week, the IIF said. Brussels meanwhile increased the pressure on Athens to commit itself in writing to deeply unpopular austerity measures and structural reforms demanded by its European Union and International Monetary Fund creditors. Jean-Claude Juncker, who heads the group of eurozone finance ministers, said on Wednesday they would discuss before the end of November whether to release eight billion euros in frozen funds from a first rescue deal agreed in May 2010. The funds are needed by December 15 before state coffers run dry, after which Papademos must force through reforms required in return for a second bailout, agreed in October. "We are waiting for a letter from the Greek prime minister on the precise intentions of authorities regarding the recommendations made" at last month's eurozone summit, Juncker told the European parliament in Strasbourg, France. During the confirmation debate in the Greek parliament, meanwhile, Foreign Minister Stavros Dimas called on EU nations to stop public declarations that Athens may leave the eurozone. "We expect our peers to stop the cacophony over Greece exiting the eurozone. This rhetoric discourages investors," he said. Growth data released Tuesday showing the economy shrank 5.2 percent in the third quarter revealed the extent of the challenge facing the new government, which comprises the conservative, socialist and far-right nationalist parties. About 250 of the 300 lawmakers in parliament are expected to back Papademos, a former vice president of the European Central Bank, and his government in the vote of confidence later Wednesday. But the coalition parties' full support for the austerity measures is not guaranteed as they angle for early elections within a few months. While polls suggest the new government has popular support, unions and left-wing parties are mobilising against the proposed cuts. The first major challenge for Papademos comes on Thursday, at a demonstration for the annual commemoration of a 1973 student uprising that helped bring down the army dictatorship which ran Greece until 1974. Last year, the march morphed into a protest by thousands against government austerity measures and the police are braced for trouble. EU, European Central Bank and IMF officials are due in Athens on Friday to assess whether conditions are ripe to unblock the next loan installment, while Papademos will go to Brussels for talks with European officials next Monday.