Greek leaders may suggest debt swap rather than a writedown

Greek prime minister Alexis Tsipras arrives in Brussels today for talks with the head of the European Commission and European Council, while finance minister Yanis Varoufakis travels to Frankfurt to meet ECB president Mario Draghi, amid signs that the Greek government may be seeking a renegotiation rather than a write- down of its debt pile.

The Greek stock market rallied yesterday on the back of reports that Greece is considering a debt swap with its euro zone lenders. Mr Tsipras also appeared to strike a more conciliatory tone following a meeting with Italian prime minister Matteo Renzi in Rome, helping to boost market sentiment.

The Athens stock market closed up 11 per cent yesterday, while the country's bank stocks rose by almost 18 per cent after Mr Varoufakis told the Financial Times that Greece was considering a plan to swap its outstanding debt with bonds linked to growth figures. Mr Varoufakis outlined his views to about 100 financiers in the City of London on Monday night.

This morning Mr Tsipras will hold meetings with European Commission president Jean- Claude Juncker and the head of the European Council, Donald Tusk, as both sides try to break a deadlock over the Greek bailout.

Mr Tsipras’s government has said it will repudiate the remaining portion of the rescue programme, which is due to expire on February 28th, and is instead seeking a fresh contract to be agreed by May.

Debt swap

A European Commission spokeswoman declined to comment on reports that Greece was considering a debt swap.

“We’re waiting for his visit. We’ll see what he has to say, and we will listen to him,” the spokeswoman said Tuesday.

Meanwhile Mr Varoufakis travels to Frankfurt, where he will meet Mr Draghi, a key player in the Greek bailout.

Separately, Greek defence minister Panos Kammenos also visits Brussels today for talks at Nato headquarters with Nato secretary general Jens Stoltenberg.

Speaking after his meeting with Mr Renzi yesterday, Mr Tsipras said that his government would maintain “balanced public finances” and would not create new deficits. He also pledged to tackle the “clientelist economy” in Greece.

Mr Renzi, who has been a strong advocate for moving away from austerity policies, said that common ground could be found between Greece and EU institutions.

“I strongly believe that the conditions exist for Greece and European institutions to find common ground,” he said. However, he added that all countries “must do their own reforms”, and said that there had been “differences of opinion on some themes”.

Growth as well

Expressing confidence that the Greek government could solve the impasse through dialogue with EU institutions, Mr Renzi emphasised that

Europe

needed growth as well as austerity.

Germany has remained tight-lipped on its position regarding Athens's plans for a renegotiated deal.

"The Greek government is still working on its position," German chancellor Angela Merkel said Tuesday in Berlin. "That's more than understandable considering the government has been in office for a few days.

“We’re waiting for recommendations and then we’ll go into talks.”