Image caption Holders of Greek bonds face writing off some of their investments' value

Greece is close to agreeing a deal with private sector bondholders on a debt swap that should pave the way for a second bailout package for the country.

The EU Economic and Monetary Affairs Commissioner Olli Rehn told the European Parliament negotiations would soon be finalised.

France and Germany had said private holders of Greek bonds must share in reducing Greece's debt burden.

Greece needs a second EU-IMF rescue to avoid a default on its debts.

The rescue, worth 130bn euros (£107bn), would include a voluntary restructuring of Greek debt - meaning bondholders would have to write off 50% of the Greek bonds' value.

"We are about to finalise shortly negotiations on private-sector involvement, which is a necessary condition for the second programme," said Mr Rehn.

And in Greece there was also a feeling it has drawn closer to a deal with bank creditors to wipe out 100bn euros from its debt.

Prime Minister Lucas Papademos told ministers a deal with banks could be reached by early next week, Greek media reports said.

"We are at a satisfactory point," Deputy Finance minister Filippos Sachinidis told Real FM radio.

"The goal is to have a voluntary agreement... that safeguards the viability of Greece's debt."

Besides Greece, Italy and Spain are also saddled with huge debts, which will have to be refinanced this year. Their borrowing costs remain unsustainably high.

And Hungary - outside the eurozone but dependent on it - has seen its sovereign debt downgraded to junk status.