Friday, January 13, 2012

Greece almost certainly will go into default

Those seven words should not be dismissed as a "who cares?" moment.

The Financial Times sent the following news alert at 11:08 a.m. EST:
Talks over Greece’s debt restructuring collapsed on Friday, an unexpected breakdown that makes it increasingly likely Athens will become the first government of a developed country in more than 60 years to suffer a full-scale default on its debt. 
In a statement, lead negotiators for Greek bondholders said that the latest offer made by Athens “has not produced a constructive consolidated response” from “all parties” – a clear reference to International Monetary Fund conclusions that bondholder losses must be increased significantly or a second Greek bail-out would have to be bigger than the agreed €130bn. 
The Associated Press explores what today's stunning announcement is likely to lead to, at least in the short term.
Representatives of private bondholders said the talks had been "paused for reflection."
The bond swap aims to reduce Greece's debt by €100 billion ($127.8 billion) and is a key part of a second, €130 billion ($166 billion) international bailout. Without it, the country could suffer a catastrophic bankruptcy that would send shockwaves through the global economy. The bailout tops a first, €110 billion program agreed in May 2010, when the country's borrowing costs soared to untenable heights.
Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos met Thursday and Friday with Charles Dallara and Jean Lemierre of the Institute of International Finance, a global banking body representing private bondholders, to discuss a deal. Finance ministry officials from the eurozone also met in Brussels Thursday night on the issue.

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