BRUSSELS — Eurozone finance ministers early today set the stage for further tough negotiations with private bondholders over how to cut Greece’s massive debt pile, by setting a low limit on the interest rate the country will pay on new lower-valued bonds.

The interest rate is the key remaining variable in a complicated debt swap designed to slice some $130 billion off Greece’s massive debt pile and bring it down to 120 percent of gross domestic product by 2020.

The eurozone believes that a debt level of 120 percent of GDP is the maximum that Greece can handle over the long-term. Without a restructuring, the country’s debts would hit close to 200 percent of GDP by the end of this year.

After 10 hours of talks, Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the meetings of eurozone finance ministers, said that the interest rate on the swapped Greek bonds will have to average “clearly below 4 percent” over the lifetime of the bonds. In the period before 2020, the average interest rate will be less than 3.5 percent, he added.

Those caps are far below interest rates demanded by Greece’s private creditors, who already have to give up on 50 percent of the face value of their investments and are expected to give the country between 20 or 30 years to repay them.

By setting the low interest-rate caps, the ministers made clear that they are not willing to increase their rescue loans to Athens beyond the $169 billion tentatively agreed in October.

The alternative would be for the eurozone to force losses on the private bondholders — a move that the it has been reluctant to make. The eurozone’s handling of Greece’s troubles is being closely watched by investors around the world, even though the Mediterranean country is one of the currency union’s smallest members. Analysts fear that forcing Greece into a default could spell more panic on financial markets and hurt big countries like Italy, Spain or even France.

Greece, the eurozone and the private bondholders don’t have much time left to sort out their differences. On March 20, Athens has to repay $19 billion in expiring bonds – money it does not have. If the bond swap is successful, that amount would not only be cut in half, but the repayment deadline would be pushed far into the future.

 

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