Municipality workers in Athens protest against state sector layoffs demanded by international lenders.

Greece yesterday announced details of plans to spend up to €10 billion to buy its own debt at a steep discount, in an important part of its effort to meet the conditions set ahead of the payment of the next tranche of financial aid.

It will swap the existing debt with six-month paper issued by the European Financial Stability Facility. The buyback will be conducted via a modified Dutch auction, whereby investors will be able to compete to get the best price within a price range.

The process allows Greece to gauge the level of demand for the bonds before it sets a final price for the deal. Holders of the debt must reveal how big a loss on the paper they are prepared to take before the price of the buyback is set. – Copyright the Financial Times Limited 2012