Negotiations on a debt swap deal with private creditors in Greece resumed today. The ECB is now part of the negotiations after IMF chief Christine Lagarde said public sector holders of Greece’s debt may need to take losses as well.
Greece is looking to get a deal done quickly to avoid a potentially catastrophic default when a bond redemption comes due in March. Greek officials are hoping to finish talks this week. The IMF put pressure on the ECB yesterday saying that public holders of Greek debt may need to accept losses if losses taken by the private sector don’t bring Greece’s debt to a sustainable level.
“We are ready to make an effort if everyone else (including the ECB) makes an effort,” a source close to the talks told Reuters.
The main area of disagreement is interest rate on the new bonds. The IMF and some euro countries are insisting the interest rate must be low enough in order for Greece’s debt to fall to 120% of GDP by 2020, down from the current 160%.
The main danger from Greece right now is that an uncontrolled default could cause a wide spread banking crisis in Europe.
The markets are largely ignoring Greece right now as earnings and news from the Fed have helped keep the bull rally going. Futures are up about 0.5% right now as the Dow is set to open 70 points higher, the Nasdaq will open 9 points higher and the S&P is set to open 6 points higher.