GREECE is still not prepared to accept what its private creditors called their “final offer” to write down the value of its debt, the Institute for International Finance (IIF) told reporters in Switzerland yesterday.
Setting the scene for a week of behind-the-scenes wrangling with European government officials as they gather in Davos, IIF chief Charles Dallara flew to Zurich to give an update on the troubled negotiations between Athens and its private debtholders.
The latter, said Dallara, will not allow the value of their bonds to be written down – potentially by up to 70 per cent – unless the new lower-value certificates they get in return pay an interest rate of at least four per cent.
Greece is refusing to move up from 3.5 per cent. “It's important that all parties realise how much we have at stake,”said Dallara, who is representing 32 different creditors including various banks and hedge funds – although it is not clear what proportion of Greece’s debt they hold.
Simon Evenett, a former World Bank official, said that European politicians are likely to be lobbied all week about the issue in Davos.
“Expect banks to collectively warn Germany and France against inflicting too many losses on holders of Greek government debt,” said Evenett. But German minister Wolfgang Schaeuble has dismissed the IIF’s comments as “bazaar” haggling.
With ratings agencies suggesting that even a voluntary deal would be viewed as a default due to the losses incurred and doubts over whether any deal can be enough, many analysts think the possibility of a hard Greek default is rising.