Greece begins buying back bonds

Demonstrators against state lay-offs on 3 December
Image caption Along with spending cuts, reducing debt was one of the conditions of Greece's latest bailout

Greece has launched a programme to buy back some of its debt, which is a condition of it receiving the next tranche of its bailout loans.

The government will offer to buy back 10bn euros ($13bn; £8bn) of its bonds from private investors for between 32% and 40% of their face value.

They will be paid in six-month bonds from the European Union's EFSF rescue fund.

The operation will reduce the face value of Greece's debt.

Private investors have until Friday to sign up to the scheme and the deals are due to go through on 17 December.

It will be structured as a Dutch auction, under which the first creditors to apply get the best returns.

Private creditors agreed in March to write off about 107bn euros of Greek government debt and many banks and insurance companies had officially given up hope of receiving any of the rest of their money back.

If the operation is successful, it will open the way for Greece to receive the next tranche of its bailout, which will be worth about 44bn euros, on 13 December.

Greece has been waiting since June for the loans, to help its heavily indebted economy stay afloat.

The payment of the loans was finally agreed last week at a meeting of eurozone finance ministers and the International Monetary Fund.

BBC World Service economic correspondent Andrew Walker says that the biggest missing element in attempts to stabilise the Greek economy is now the need to write off some of the debt that the country owes to other countries.

In an interview published on Sunday, German Chancellor Angela Merkel hinted that she might be prepared to allow that to happen.

She has been very resistant to the idea in the past, but it may turn out to be the only way to put Greece on a firmer financial footing.