Business

Greece edged towards a deal on Saturday to avert a chaotic default, hammering out a plan for recapitalising its tottering banks, but other issues remain - and it must still persuade its political leaders to back painful reforms involved in the rescue.

Greece has agreed with euro zone partners on how to recapitalise Greek banks after a planned bond swap, but has yet to resolve issues related to labour reform and spending cuts in talks with lenders, the country's finance minister said on Saturday.

Greece is to resume marathon talks with European and IMF officials on Saturday as negotiations to produce a bailout deal for its crisis-hit economy by next week reached a climax.

Prime Minister Lucas Papademos is set to meet the leaders of the parties in his coalition government on Saturday amid mounting pressure from Greece’s lenders for further structural reforms and austerity measures.

Greek Prime Minister Lucas Papademos and Italy's Mario Monti were appointed within days of each other last November to replace politicians who took their countries to the brink of financial collapse.

Greece's government struggled on Friday to agree tough labour reform that appeases both wary political leaders and irate lenders faced with a rising bill to save the country from bankruptcy.

A deal to restructure some 200 billion euros of privately-held Greek sovereign debt that would pave the way for a new financial rescue is "within reach," the European Commission said on Friday.

Greeks have moved at least 16 billion euros ($21 billion) in funds to foreign banks in the last two years, about a third of which went to Britain, the finance minister said on Friday.

Financial experts are concluding that Greece may need another $20 billion cash infusion even if it eventually completes contentious negotiations with its private creditors to cut in half the money it owes them.

A German proposal to tie Greece’s future with a pledge to never default looks barmy. The euro zone already has a hard enough time getting Greece to reform its economy, partly because Greece can wield the threat of a messy default.