Inspectors for Greece's international lenders and private creditors kick off a round of meetings with the government on Monday to prepare for a new 130-billion euro (£111 billion) bailout plan and bond swap scheme to keep the country afloat.
Greece narrowly averted bankruptcy this month after foreign lenders agreed to release an 8-billion euro tranche of aid, but remains at risk of ending the year with a deeper-than-expected hole in its finances as a recession hits targeted tax revenue.
The EU, IMF and ECB inspectors -- known as the troika -- begin their visit to Athens on Monday with a focus on preparing the bailout agreed in October, and assessing the impact of a debt swap plan on banks.
They will also take stock of Greece's slow progress on reforms.
The troika will meet with the finance minister on Monday, kicking off talks on the new programme, which is the priority. The team will be here for a week and meet other ministers as well, said a finance ministry official, who declined to be named.
There is no new tranche of financial aid pending and they are not expected to make any decisions during this visit.
Athens, which faces bond maturities this month starting December 19, is expected to receive the 8-billion euro loan tranche under its first bailout in a few days.
After meetings this week, the troika will take a break for the Christmas holiday and return in January to continue talks, the finance ministry official said.
BOND SWAP TALKS
Greece and representatives of its private sector bondholders will also meet on Monday to try work out a voluntary debt restructuring, dubbed private sector involvement (PSI+), a key component of the 130-billion euro bailout programme.
There will be consultations with private bondholders on Monday, and possibly Tuesday, on the scheme to try to finalise the terms of the debt swap, a government official close to the procedures told Reuters on condition of anonymity.
Banks represented by the Institute of International Finance (IIF) agreed on October 27 to write off the notional value of their Greek bond holdings by 50 percent in exchange for new paper.
The write-down will help reduce Greece's debt ratio to 120 percent of GDP by 2020. With 206 billion euros of Greek bonds in private sector hands, the scheme is expected to lighten the country's debt burden by 100 billion.
But key details of the plan such as the coupon and discount rate, which determine the cost for banks, are still being negotiated.
One sticking point is the new bonds' net present value (NPV) calculation. NPV is a measure of the current worth of the bonds' future cash flows.
Greece is offering creditors a 4.5 percent coupon on new bonds while bondholders want an 8 percent coupon, according to Greek media.
The Kathimerini newspaper on Sunday said Greek authorities were also working on draft legislation to introduce a collective action clause to squeeze out bondholders so that the terms of any untendered bonds have the same as the new ones if a majority of debtholders -- for instance 75 percent -- vote in favour of the exchange.
But a finance ministry official dismissed the report.
We are committed to a voluntary transaction, the official said.
A second government official also played down the report.
Options are open but there is no decision to add such a clause, the official close to the negotiations told Reuters.
The initial trigger for the euro zone debt crisis that threatens to unravel the common currency, Greece's 220 billion euro economy is seen contracting by more than 5.5 percent this year, with recovery not expected before 2013.
The recession has heaped pressure on the country's already dire finances, and Greece now risks missing its 9 percent deficit target this year.
($1 = 0.7482 euros)
(Additional reporting by Ingrid Melander, editing by Deepa Babington and David Hulmes)