Wall Street Journal
February 8, 2012
The hopes for a successful conclusion to the latest Greek debt talks take financial markets closer to having the sword of Damocles removed from over investors' heads.
There is much to a Greek restructuring deal yet to be accomplished, but analysts say it increasingly looks likely that Greece will avoid a disaster scenario where it doesn't have the money to pay its debts and is forced to leave the euro zone.
But that doesn't mean the worries for Europe are over.
That is even the case for Greece, where it is unclear how many holders of its government bonds will accept losses under a "voluntary" debt reduction plan—a program that would enable the country to avoid the humiliation of being declared in default. As a result, many analysts believe Greece will have to force its bondholders to take the deal and end up technically defaulting on its debts under the arcane rules of the bond market.
Such an event would likely trigger payouts on credit-default swaps designed to protect debt holders, analysts say. That could spark fears of collateral damage to banks on the hook to make good on the payouts.
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