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Greek lawmakers and private holders of Greek debt ended the most recent bout of negotiations today, according to an FT Deutscheland report. Despite rumours to the contrary, the debt swap deal remains up in the air.Charles Dallara, Managing Director of the Institute of International Finance which has represented private creditors in the debt swap deals, departed Athens for Paris today to consult with bank representatives.
This follows reports that progress towards a debt swap deal had been progressing swiftly, and that a debt deal would be approved over the weekend or today. EU Commissioner for Economic and Financial Affairs said this morning that negotiations should wrap up “shortly,” according to Bloomberg.
Before leaving Athens, Dallara told reporters that Greek bondholders have made the “maximum offer” on the size of haircuts they’re willing to bear. In an interview on Greek television (via Marketwatch), the negotiator said that limit would entail losses of 65% to 70% for private debtholders, a number far higher than the 50% haircut discussed in October.
Even if negotiators can reach an agreement, it remains unlikely that a percentage of Greece’s creditors sufficient to make the deal effective will acutally decide to go forward with the debt swap. A number of hedge funds have already threatened legal action if they are forced to take haircuts without being able to reap the benefits of credit default swaps, a contingency the deal is currently trying to avoid.
The deadline for an agreement between Greece and its creditors is January 31, however this agreement does not assume Greece will earn vows of complete participation in the deal by that time.
Without the credit swaps and the next round of aid, Greece will be forced to default on more than €14.14 billion ($18.3 billion) in maturing debt on March 20. In reality, the “default” clause might not be triggered until March 27 (h/t @Pawelmorski).