BBC News
January 27, 2012
They are trying, really trying, to get that deal done to cut the value of Greek debt - one that accepts the new realities I described in my last post.
The key is that all sides now accept that, for the numbers to add up, the public sector has to take a hit. There's a limit to the losses that the private sector debt holders will accept, and they have reached it.
But the technicalities of "public sector involvement" turn out to be almost as complicated as the private variety.
People close to the negotiations still hold out the prospect of reaching a deal early next week, but there's a lot to be ironed out yet.
By far the biggest problem with the European Central Bank directly taking a loss on the Greek bonds that it has purchased is that it would probably mean the central bank had to stop accepting Greek bonds as collateral in return for providing cash to Greek banks.
If you are a Greek bank, this is more than a "problem". It would be a catastrophe. At this point, cheap ECB liquidity is more or less the only thing keeping the Greek banking system afloat.
So, they need to find a way round the roadblock.
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