Greeks could pull CDS trigger

By Tania Suárez, in Madrid | Talks regarding the Private Sector Initiative and Greece resumed on Thursday as there apparently isn’t any actual progress made yet. It is expected that the private investors’ representatives that have returned to Athens, Charles Dallara and Jean Lemierre of the IIF, will continue negotiations. The Greek debt haircut is coming closer to becoming a reality and as the Greek prime minister said, it should be signed on February 1.

The summit of the EU leaders next Monday will be a difficult deadline to avoid and it will be necessary to reach clear agreements. Santander analysts believe that

“if talks end up again in a stalemate, one might expect the Greek government to apply its legislation on collective action to compel a full acceptance, even at the expense of activating credit default swap contracts (CDS).”

CDS that at this moment, according to Banco Sabadell, insure $3.7 billion, that is, just over 1% of the Greek sovereign debt.

Nordkapp analysts point out that

“there are only two possible ways of resolving the issue (…) one would be a haircut and the other a Greece’s exit from the euro”.

At Morgan Stanley, experts are following the Greek situation with some concern, especially in relation to its effects on the equity market. However, the Greek government seems to be optimistic and sees feasible working out a solution this approaching weekend. After all, as noted by the Santander, 90% of Greek debt has been issued under Greek law.

The president of BNP Paribas said at the Davos World Economic Forum that the Greek government
“is unwilling to go beyond 3.50% while the private creditors are reluctant to go below 4.00%.” And he added, “The offer put on the table is the maximum acceptable to reach a voluntary agreement. Now you know all the elements.”

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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