Body Behind Greek Bond Swap Raises Red Flag on Failure

Wall Street Journal
March 6, 2012

In the eyes of the group trying to get the Greek bond swap over the finish line, failure isn't an option—or, at least, a palatable one.

Private investors in Greek bonds have until Thursday night to decide if they will participate in the country's debt restructuring and rescue, but with scant details about their take-up rate so far attention has turned to a report about the consequences of the deal failing.

The Institute of International Finance, which represents about 450 banks and other private creditors to Greece, produced a confidential memo last month about what it called the "very important and damaging ramifications that would result from a disorderly default on Greek government debt."

"It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed €1 trillion," or about $1.32 trillion, the IIF analysis reads.

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