25.01.2012
By Simon Miller
Credit default swaps (CDS) may be allowed to be triggered if talks over Greek debts fail.
Head of the European Commissions’ economic team Mario Buti said CDS may be considered if talks between private debt holders and Greece fail which suggested that Greece will be left to its own devices when it has to make a €14.5bn debt payment on 20 March.
Pressure is stepping up on Greece to get a deal after talks stalled once again over the rate of the re-issued bonds.
Creditors are believed to want 4.25% on the new bonds with a 69% haircut but both the International Monetary Fund and the EU want private debt holders to accept 3.5% on top of the agreed 50% haircut in existing debt.
The International Institute for Finance which represents creditor banks warned the EU away from talking about defaults and that all parties, including the European Central Bank which will not participate in the debt swap, should participate.
IIF managing director Charles Dallara told Bloomberg: "We put an offer on the table and it remains on the table. All parties need to contribute to the solution. We are wiping off the face of the earth €100bn in existing claims against Greece.”
“It is important for all parties to recognize how much we all have at stake here and work together and co-operatively to find a solution. Some might minimize the risk of an involuntary debt exchange and point to other cases such as Argentina. I would caution against that attitude,” said Dallara at a press conference in Zurich.
Austria's finance minister Maria Fekter told fellow EU finance ministers that patience with the Greek government was exhausted.
"Greece has failed its austerity targets by a wide margin. The Greeks have made decisions, but they weren't implemented. They have agreed to austerity measures, but costs haven't come down. This situation has caused great consternation," she said.
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