Negotiations on a debt relief deal between Greece and its private creditors dragged on Wednesday, with both the government and the International Monetary Fund saying a deal was likely in a “matter of days.”

Greece owes private banks and financial institutions about 200 billion euros ($262 billion Cdn) but can’t afford to pay them back.

"We are at a crucial point in developments. In the coming days, the agreements must be completed" for the bond swap and a second 130 billion euros ($170 billion) bailout package, government spokesman Pantelis Kapsis said.

Greece must get its private creditors to voluntarily accept a haircut on what they are owed as one condition for getting the bailout from the European Union and the IMF.

The deal with lenders would see them swap the bonds they hold with new ones worth half their original face value, longer repayment times and lower interest rates.

They will also get a cash sweetener for accepting the deal, which will cut 100 billion euros off Greece's national debt.

Without a deal, Greece will default on March 20 when a 14.5 billion euro bond repayment it can’t afford comes due. A default would spell disaster for the country and destabilize European and global markets.

Overall, the investors participating in the deal will face a loss on their bond holdings of more than 70 per cent, Finance Minister Evangelos Venizelos said in a Parliament committee meeting Tuesday night. The official offering of the new bonds will come by Feb. 13, Venizelos said.

Greek unemployment now 19.2%

Another condition of the bailout is satisfying debt inspectors from the European Commission, European Central Bank and the IMF, known as the troika, that austerity measures are getting Greek spending under control.

Talks between Greek government officials and the debt inspectors continued in Athens Wednesday.

Both deals will need the agreement of the heads of the three political parties in Greece's interim coalition, Kapsis said, and Prime Minister Lucas Papademos was to call the party heads to a meeting to sign off on them and required austerity measures.

Chief IMF inspector Poul Thomsen also said a deal was close, but pressed the recession-plagued country to lower employment costs and even slash the minimum wage to make the economy more competitive.

"It's a matter of days," Thomsen was quoted as saying by the Athens daily Kathimerini. "The discussions for the (new) program will be concluded very soon."

Thomsen insisted wages in Greece remain too high and urged the government to consider cutting the minimum wage of 750 euros ($983) gross pay per month.

Greek unions and employers are to resume negotiations on Thursday in an effort to cut labour costs, but both sides are already in agreement that the minimum wage and basic private sector pay should not be affected, arguing such a move would only deepen the recession.

The EU statistics agency Eurostat on Tuesday revealed that unemployment in December in Greece rose to 19.2 per cent, the second highest rate in the eurozone after Spain, which stood at 22.9 per cent.

With files from The Associated Press