"In the next few days, our country needs to take difficult decisions and to complete a gigantic effort which rewards the sacrifices, the achievements and the hopes of the Greek people."
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The prospect of elections as early as April has further complicated the talks, with political leaders in Papademoss national unity coalition eager to distance themselves from any cuts that herald more pain for ordinary Greeks.
A senior Greek banker earlier said a final accord on the bond swap was on hold until Athens can show it is serious about tackling reforms.
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"I hoped that these measures will be implemented but one cannot probably be absolutely sure," Nowotny told Austrian radio station ORF.
Increasingly exasperated by Athens ilure to live up to pledges on the reform front, European partners have demanded all Greek parties commit to measures agreed under the bailout irrespective of who wins the next elections.
Without a deal and a subsequent release of funds from the bailout plan, Greece would sink into an uncontrolled deult that risks spreading turmoil across the euro zone and tipping the global economy back into recession.
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Despite expectations of a decision on the bond swap at the European Union summit in Brussels on Monday, sources miliar with the matter said euro zone leaders were not asked to give an outright approval or rejection of the bond swap.
On top of austerity measures already taken that regularly bring droves of angry protesters onto the streets, Greeces lenders have demanded it make extra spending cuts worth 1 percent of P - or just above 2 billion euros ($2.6 billion) - this year, including big cuts in defence and health spending.
Underscoring the stakes involved, ECB Governing Council member Ewald Nowotny said whether Greece stays in the euro zone depended on its ability to push through a series of measures.
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ATHENS - Greece must make "difficult" decisions in the coming days to clinch a debt swap agreement and a 130 billion euro bailout package needed to avoid an unruly deult, the government said on Tuesday.
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Venizelos said euro zone finance ministers would meet on Monday to discuss Greece. But a spokesman for Jean-Claude Juncker, who chairs these meetings, said: "Nothing has been decided yet about a Eurogroup meeting next week."
"The debt swap agreement is ready, but it will not be announced before the end of the week and until the government has made certain commitments on reforms, labour issues and the pension system," said the banker, who declined to be named.
In a sign of the challenges the government ces in pushing those through, a Greek union official said the countrys major unions were gearing up for more anti-austerity protests next month after an early grace period for Papademoss government.
Previous declarations of an imminent deal have iled to come to fruition and one senior Greek official cautioned: "Not everything has been agreed yet."
The talks had been complicated by hedge funds that built up positions in Greek bonds, as they hoped the country would go under so that insurance against the debt could be paid out, or that they would be paid in full by holding out.
"Without the new (bailout) programme we cannot have the necessary funding and the debt swap cannot be completed," Finance Minister Evangelos Venizelos told reporters.
Their actual losses on the holdings are expected to be closer to 70 percent, however, based on an average coupon of under 4 percent -- a level the two sides have converged on after several rounds of talks, the senior Greek banker said.
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DEBT SWAP END-GAME
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A German minister went so r as to call for Athens to surrender control of its budget policy to outside institutions if it could not implement reforms, though Berlin has toned down the debate after an indignant reaction from Greek officials.
Near-bankrupt Greece is struggling to convince sceptical lenders it can ram through spending cuts and labour reform to help bridge a funding shortll driven by a worsening economic climate and its previous reform plan having veered off track.
Greece has responded by threatening to enforce losses on investors who do not voluntarily sign up to the swap.
Venizelos also said the Greek parliament must back deals on the debt swap and the new bailout by Feb. 13.
With a long-awaited debt swap deal largely almost secured, Athens focus is now squarely on the reform front. Failure to persuade lenders it can follow through on its pledges could put both the bond swap and the countrys latest bailout at risk.
It needs to wrap up both set of talks by mid-February at the latest to ensure it gets money in time to avoid a chaotic deult when 14.5 billion euros of bond redemptions ll due in March.
Prime Ministevery short haircut storyr Lucas Papademos on Tuesday confirmed that Athens was aiming for a definitive agreement on the debt swap by the end of this week -- roughly the same time it expects to conclude talks with lenders in Athens on its second bailout.
He reiterated that Athens is "one formal step away" from completing a deal with private bondholders to restructure 200 billion euros of Greek debt, and confirmed that talks on both the swap and the bailout were "converging" and "co-dependent".
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As part of the swap, banks and insurers would take a 50 percent writedown on the notional value of the Greek debt they hold, easing Athens debt load by 100 billion euros.
Papademos acknowledged that the main sticking points in talks with the so-called "troika" of foreign lenders - the European Central Bank, the EU and the International Monetary Fund -- revolved around spending cuts and labour reform.
LABOUR REFORM WOES
Talks with the troika have struggled over further cuts in labour costs in the private sector, which Athens has resisted over fears they could deepen a brutal recession and impose additional hardship on the poor, Greek officials say.
"By delaying the debt swap, European partners are putting pressure on the government and political leaders to make certain commitments."
That is expected to occur only after a comprehensive agreement is struck on both the swap and the bailout, they said.
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Venizelos told lawmakers that investors losses may top 70 percent. "There is a very serious discussion based on new cts. We are talking about a PSI much greater than the original," he said. "We are talking about a haircut on the net present value exceeding 70 percent."
