ATHENS  - Crunch talks between Greek officials and the nation’s private sector creditors were adjourned till Saturday, as Italy prepared a major liberalisation programme and their eurozone partners held their breath.

“We’ll continue tomorrow,” said Finance Minister Evangelos Venizelos, as the two sides ended several hours of talks, over moves by Greece to have around 100 billion euros ($129 billion) slashed from its huge debt.

The Institute of International Finance (IIF), which is representing the banks and financial institutions in the Athens talks, released a brief statement saying that “elements” of a deal were in place but calling on all parties to “act in a decisive fashion and seize the opportunity to finalise this historic agreement.”

It had been hoped that the days of talks would be concluded on Friday. Greece was also involved in parallel negotiations with its EU-IMF bailout partners on a new loan to dodge a March default. Prime Minister Lucas Papademos met again with global private bank group representatives after late-night talks on Thursday as his finance minister held talks with senior auditors from the European Union and International Monetary Fund on the separate eurozone rescue plan. Government spokesman Pantelis Kapsis told private Radio 9 that “the atmosphere is good... and we are hoping that the talks will be terminated soon.”

The main FTSE/Athex index showed a gain of 3.47 percent for the day as investors bet on good news but there were no developments by the close. The main European markets were slightly lower.  “Significant headwinds still remain, not least ... Greece,” said Michael Hewson, market analyst at trading group CMC Markets. “Even if a deal is reached it won’t even begin to solve Greece’s problems of a shrinking economy and a growing debt burden,” he added

German Foreign Minister Guido Westerwelle meanwhile insisted that endless rescue packages for indebted economies are not the answer to the eurozone’s woes. “The debt economy itself has reached its limits,” Westerwelle told the Brookings Institution think-tank in Washington.

“Rescue packages and short-term liquidity are not a solution to the crisis. They are buying us time in which to address the root causes — no less, but also no more.” Greece has a looming loan repayment worth 14.3 billion euros on March 20 which it cannot honour without financial assistance. Greece is seeking to slash around 100 billion euros from its huge debt through a voluntary bond swap with creditors, a process that would unlock a new eurozone rescue package worth 130 billion euros overall.

Under the so-called private-sector initiative, banks and other financial institutions are expected to take at least a 50pc “haircut” on their Greek debt, which would remove about 100 billion euros from Athens’ massive debt burden of more than 350b euros.

The talks hinge on the interest rate to be offered for new bonds which will replace maturing debt that is being written down, with Greek media reporting Friday that a deal seems close on a flexible rate of around four percent.

The Kathimerini daily said the new bonds would be offered with a sliding scale of 3.0 to 4.5 percent over time, which would imply a much bigger writedown of some 68 percent.

In a sign that an agreement could be near, the IMF has said it is ready for talks on extra rescue funds needed to keep Athens from defaulting in March.

Greece wants an outline of the deal to be ready by Monday, and a full agreement by January 30 when the European Union is scheduled to hold a summit.

Greece is under pressure from the EU and IMF to revise its private-sector wage agreements to reduce labour costs and improve competitiveness as part of the new bailout. Greek unions say such a measure would only exacerbate a deep recession brought about by two years of austerity measures already adopted under the EU-IMF economic adjustment plan.

Meanwhile Italian Prime Minister Mario Monti’s government on Friday adopted a structural reform programme aimed at breathing new life into a debt-stricken economy, but which has already met heavy opposition. Technocrat Monti’s aim is to get Italy growing again after years of lagging its eurozone peers so it can eventually reduce a debt pile equal to 120 percent of gross domestic product — double the 60-percent EU ceiling. “The cabinet today adopted a draft bill with a package of structural reforms for growth,” Monti said after an eight-hour cabinet meeting.

The measures were aimed at boosting competition in several sectors and improving Italy’s creaking infrastructure, he explained.

Numerous sectors of the Italian economy remain sheltered from competition, but with the country’s economy likely to have entered a recession and little room for more austerity, reforms to unlock growth have become a top priority.

Quick action by the government to spur growth will be key to convincing markets Italy will be able to keep on top of its massive debt.