New leaders seeking 'menu of debt swaps'

Greece's radical new leaders flew into Rome yesterday seeking to build support for new proposals aimed at ending a stand-off with the country's creditors and its European Union partners.

In an interview with the Financial Times, Greek Finance Minister Yanis Varoufakis said the leftist-dominated government in Athens would be making proposals for "a menu of debt swaps" that would avoid the need for any of the country's mountain of foreign debt to be written off.

Under an approach he described as "smart debt engineering," Varoufakis proposed issuing of two new types of bonds.

One would be linked to nominal economic growth to refinance European rescue loans and the other would be "perpetual bonds" that would replace Greek bonds owned by the European Central Bank.

The approach would avoid creditors having to take a hit on the Greek debt, an outcome fiercely opposed by several EU countries led by Germany, and would be politically hard for the likes of Ireland, which was forced to stick to a painful programme of spending cuts as a condition of its own bailout in the aftermath of the 2007 financial crisis.

Varoufakis was to hold talks in Rome with his Italian counterpart Pier Carlo Padoan while Prime Minister Alexis Tsipras was travelling from Cyprus to meet with his Italian counterpart Matteo Renzi over lunch.

The debt swaps proposal was likely to get a sympathetic hearing from Renzi, who is well-placed to broker an end to the confrontation as he has the ear of German Chancellor Angela Merkel but is also in the camp of those EU member nations who want a more flexible, growth-first approach to the bloc's economic policy after the crisis.