Reuters warned that the disagreement “increases the risk that it will prove impossible to strike a voluntary restructuring deal between Greece’s creditors and the Greek government”, adding:
Negotiations over what’s called ‘private sector involvement’ (PSI) have been going on for nearly seven months without a concrete breakthrough. Failure to reach a deal by March, when Athens must repay 14.5 billion euros of maturing debt, could result in a disorderly default.
Bloomberg says that the deadlock is “reminiscent of October’s bargaining over bond losses and risks disrupting the January 30 summit [of EU leaders]”.
Brinkmanship over Greece clouded progress toward new fiscal rules and a beefed-up rescue fund, denting newfound confidence in the anti-crisis strategy and threatening to overshadow next week’s summit of European leaders.
And The Daily Telegraph explained:
Talks to restructure Greece’s debt hit a new impasse after eurozone finance ministers rejected an offer from private bondholders because the cost of sweeteners on new Greek bonds were too high.
The ministers have sent the offer back for negotiations,” said an official last night. “The ministers want a lower coupon than presented in the offer.”
Eurogroup president Jean-Claude Juncker: Greek creditors must accept higher more losses. Photograph: John Thys/AFP/Getty Images
7.29am: Jean-Claude Juncker, the chairman of the Eurogroup countries, was adamant this morning that Greece’s creditors must accept a lower interest rate on the new, longer-dated bonds that are expected be issued in exchange for their existing Greek holdings.
Juncker told reporters in Brussels that:
Ministers asked their Greek colleagues to pursue negotiations to bring the interest rates on the new bonds to below 4% for the total period, which implies the interest comes down to well below 3.5% before 2020.
Juncker also declared that “It’s obvious that the Greek program is off track”, indicating that he expects bondholders to take greater losses.
This raises the stakes between Greece and its bond-holders. Last weekend, the Institute of International Finance said that it had already made its “final” offer to Greece.