Banks stalled talks with Greece over its debt write off

Greece on euro exit fears

Conversations between Greece and its private lenders, mainly European banks, over a possible 50% write off of its debts have stalled.

The committee representing Greece’s private lenders said discussions were paused for both parties reflection.

European Union and International Monetary Fund fixed as a pre-condition for Greece receiving bailout cash to reach a deal between them. Without the money, Greece may run out of cash and be forced to leave the euro.

Analysts said the alternative to a voluntary debt write off is likely to be an outright default by Greece as soon as March.

Another alternative may be for Greek government to pass a law unilaterally changing the terms of its debt repayments, as most of its debts are subject to Greek law.

Analysts argued the main fear for a debt agreement between Greece and its private lenders is that some of Greece’s debts are reported to have been bought up on the cheap by so-called vulture funds.

Vulture funds are investors specialized in pursuing troubled borrowers for payment in full. A common tactic of vulture funds is to veto agreements between distressed borrowers and their main lenders, in the hope of winning special treatment for their own loans.

By its side, European Central Bank, which has a significant share of Greece’s debts, is not participating in the conversations and said it will not accept any write off of the debts it holds.

If agreed, the debt deal is expected to give Greece longer to repay its debts, as well as cutting the mount due.

Greek government said if Greece failed to secure new bailout cash from European Union and International Monetary Fund, for which the debt deal is a condition, it would be forced to exit the euro.