German Foreign Minister Guido Westerwelle travels to Greece on Sunday carrying with him a message of support ahead of another crucial week for the debt-crippled country and the eurozone.
Westerwelle will meet separately with Prime Minister Lucas Papademos, Foreign Minister Stavros Dimas and Antonis Samaras, the head of the New Democracy party, a member of the governing coalition and current frontrunner in opinon polls.
German foreign ministry spokesman Andreas Peschke said on Friday that the financial crisis in Greece, which has the highest debt ratio in the bloc, would be at the top of the agenda.
"The foreign minister is travelling with a message of encouragement and expectation,» he said. «Encouragement because... we want to embolden the Greek government to implement the reform steps it has announced and expectation because we want them to implement them."
Westerwelle's visit comes two days after talks between Greece and private bank creditors on a critical debt writedown stalled, raising the risk of a disorderly default that would plunge the eurozone into an even deeper crisis after the downgrading of several countries by Standard and Poor's on Friday.
The proposed deal would have seen banks taking a voluntary 50 percent «haircut» on their Greek debt, which would cut about 100 billion euros ($127 billion) from Athens' massive debt burden that currently exceeds 350 billion.
Sources told Kathimerini that talks stalled after Greek leaders and private investors failed to reach a consensus on the interest rate level for the new bonds as well as the law that will apply to them.
It said private sector negotiators want the new bonds to pay interest of around five percent, whereas Greek officials are only willing to agree on no more than four percent.
German authorities want an even lower rate of two to three percent while the IMF believes the interest rate must not surpass 3.8 percent for the Greek debt to be sustainable, according to Kathimerini's Sunday edition.
"Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,» the Institute of International Finance (IIF) which heads negotiations for the banks, said Friday.
It said in a statement that the talks had failed to produce a «constructive consolidated response by all parties».
"Until the (debt write-down talks) are complete and the new loan agreement is voted, the country continues to face acute economic dangers,» Papademos warned on Friday.
However, talks between Greek leaders and private investors, headed by IIF managing director Charles Dallara, are due to resume on Wednesday.
"Our interlocutors from the IIF will return on Wednesday and our goal is the general format to be agreed upon before the next Eurogroup on January 23,» Finance Minister Evangelos Venizelos said on Saturday.
Officials from the European Commission, the European Central Bank and the International Monetary Fund, the so-called «troika» of international auditors, are also due back in Athens on Tuesday to assess Greece's efforts in reducing its deficit and launching structural reforms.
A positive report from these officials is vital as is a deal on the debt writedown to unlock a eurozone bailout offering another 130 billion in loans to Greece, which has already used up two-thirds of the first 110-billion-euro rescue package it secured from the EU and IMF in May 2010.
In addition, the European Task Force, set up to help Greece implement structural reforms, is also due back in Athens this week to continue its efforts in providing Greece with technical assistance.
Containing salaries and increasing productivity will help close the competitiveness gap between the Greek and European economy, Task Force head Horst Reichenbach said in an newspaper interview published on Sunday.
"The most effective way of making up lost ground is by containing salaries and increasing productivity,» Reichenbach told Typos Tis Kyriakis.
"It is estimated that by the end of 2013, Greece can bridge most of the gap in competitiveness compared to its European counterparts,» Reichenbach added.