Crucial talks between Greece and its private creditors over a bond swap deal have been halted for five days to allow “reflection”, after both parties failed to agree on how much of a write-off of Greek debt investors would have to accept.
Greece must secure a deal before it can receive an urgent second bailout from the EU and International Monetary Fund (IMF), necessary if the county is to avoid defaulting on its debts and potentially being forced to exit the euro zone.
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After two days of high-level discussions, the committee representing Greece’s creditors said that a number of parties had not responded constructively to proposals that lenders take a voluntary haircut of 50 percent, writing off half of the value of Greek bonds in exchange for a combination of cash and fresh bonds, according to the BBC.
In a statement, the steering committee of the Institute of International Finance (IIF) praised the Greek’s government’s leadership but said discussions were “paused for reflections on the benefits of a voluntary approach.”
The statement did not clarify when discussions would resume, but the Wall Street Journal and other agencies, citing a senior Greek government official, indicated that talks would likely start again next Wednesday.
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The government and holders of Greek debt agreed in October to implement a 50 percent cut in the face value of Greek bonds, but two months on the sides have yet to reach agreement on the coupon and maturity of new replacement bonds in order to ascertain the exact total losses that investors will bear, according to Bloomberg.
The bond swap is aimed at getting Greece’s debt down by $127.8 billion, and is a key part of a second international bailout needed to stave off bankruptcy.
The alternative to a voluntary debt write-off agreement being concluded between Greece and its creditors would probably be an outright default by the country, the BBC reports, although the government could also theoretically change the terms of its debt repayments on a unilateral basis through legislation.