Talks with Greek lenders on hold

ATHENS, Greece, Jan. 13 (UPI) -- Talks between lenders and the Greek government on a 50 percent devaluation of Greek debt have been put on hold, the Institute of International Finance said.

In a statement, the IIF, which represents international banks, said talks were "paused for reflection on the benefits of a voluntary approach," to lowering Greece's debt obligations, the BBC reported Friday.

A government spokesman said last week Greece could go into default on its obligations if it does not receive the next disbursement of bailout funds from the European Union and the International Monetary Fund.

But one of the conditions the IMF and the EU have spelled out for Greece is a 50 percent reduction of its obligations.

The threat hanging over the heads of lenders is that a refusal to go along with a 50 percent devaluation could result in no returns at all if Greece goes into default.

The IIF did not announce if any resumption of talks was scheduled.

The European Central Bank has been keeping bond yields low buy purchasing Greece's debt, but is staying away from the discussions. Nevertheless, the ECB has said it would not accept any devaluation of debt it purchased.

On another financial front, Prime Minister Lucas Papademos said last week that Greek unions must agree to another round of spending cuts if Greece is to remain solvent.