GREECE - Four Greek state pension funds have reached a final buy-back agreement with US investment bank JP Morgan and hedge fund North Asset Management to reverse a disputed bond deal.

The deal brings to an end a five-month argument, which erupted after the funds bought a Greek government structured bond at an unfavourable price through a pre-planned chain of deals involving the hedge fund, German lender HypoVereinsbank and Greek brokerage Acropolis.

In an official statement, the Greek government has confirmed the bond buy-back was completed on Wednesday.

JP Morgan announced in June the funds agreed to its re-purchase offer, after the Greek government promised to pay for any interest gained on the bond investment.

Last week, the investment bank denied claims the deal had reached an impasse after union groups, closely aligned to the Greek opposition labour party, failed to accept the agreement's terms.

Reports yesterday stated JP Morgan and London-based North Asset Management will buy back the €280m worth of bonds and will also pay $3.65m (€2.75m) to cover interest payments.

Both JP Morgan and North Asset Management declined to comment today.

The bond affair has turned into a major political affair in Greece, with the government setting up an inquiry commission, the closure of Acropolis and the resignation of the manager of one of the funds involved. Agapios Simeoforidis, president of the Greek Civil Servants' Auxiliary Fund (TEADY), stood down in March.

In the wake of the scandal the government introduced new restrictions for pension fund investment which will lead to capping exposure to structured bond products.

Yesterday, prime minister Costas Karamanlis pledged that pension reform would be a top priority of his government should it win next month's early election.

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