Negotiations between Greek leaders and the debt-stricken country's international creditors are under way in Athens over a possible debt swap aimed at averting a possible default within weeks.
Lucas Papademos, the Greek prime minister, and Evangelos Venizelos, the finance minister, are seeking to persuade creditors to voluntarily write down 100bn euros ($129bn) from Greece's total debt of more than 350bn ($450bn).
"Talks with private creditors are without a doubt at a very sensitive stage," Venizelos told parliament shortly before talks began.
"We want this (deal) to happen in a way that is safe for Greece - with Greece in the eurozone - and safe for the real economy and the financial system."
As part of the deal, creditors would accept new, lower-yielding bonds and a small cash payment in return for maturing bonds. But talks broke down last week over the interest rate Greece planned to offer on new bonds and a plan to enforce investor losses.
A Greek government official said on Wednesday that the interest rate on the bonds would be the most visible aspect of the talks.
"All variables are being considered," he said. "After the temporary pause in the negotiations last week, the parties have reconsidered and are back."
Greece's creditors are being represented by Charles Dallara, head of the International Institute of Finance, a global association of financial institutions.
Athens needs a deal with the private sector to avoid going bankrupt when 14.5bn euros ($18.5bn) of bond redemptions fall due in late March.
The debt swap deal would see creditors voluntarily give up 50 per cent of the nominal value of the bonds they hold.
Greece's foreign lenders have warned no further aid will be released until the bond swap deal is done, and investors fear a disorderly default could provoke a shock to the financial system that would tip the global economy into recession.
Pressure on hedge funds
With analysts warning the costs of failure are too high for either side to leave without agreement, hopes have grown of a deal by the end of the week or early next week.
"In the end, something is likely to be agreed partly because no side is going to want to see a disorderly default," Ben May, European economist at London-based Capital Economics, said.
Al Jazeera's Andrew Simmons, reporting from Athens, said there "has to be some sort of a solution in order to avoid bankruptcy".
"The main point is the interest rates. The government is pushing - it is believed - for around two per cent on these bonds, or 'I Owe You's' and the actual investors want much more, up to five per cent possibly more. And now there could be a solution. There could even be a fudge, but there is so much riding on this."
Greece had ratcheted up pressure on hedge funds and other holders of Greek debt ahead of the talks by threatening to consider legislation that forces creditors to take losses if not enough bondholders signed up to the deal.
A law on so-called collective action clauses forcing holdouts to accept losses could be drafted if Greece deems the participation rate unsatisfactory, Greek officials said.
A team of European Union, International Monetary Fund and European Central Bank officials are already combing through Greece's books as part of efforts to finalise the new 130bn euro rescue package the country needs to stay afloat.
The bailout, together with structural reforms, aim to reduce Greece's debt to a more manageable 120 per cent of gross domestic product in 2020 from about 160 per cent now.
Source: Al jazeera's agencies