Dallara: Greek Debt Swap Will Likely Cause Selective Default

An agreement between the Greek government and private bond holders will likely cause a selective default on Greek sovereign debt, the managing director of the Institute Of International Finance said Friday.
“We are not worried about a selective default, which will last a matter of days, but won΄t trigger a CDS event,” Charles Dallara, head of the banking industry΄s most important trade group, said on the sidelines of a conference in Frankfurt, pointing to credit default swaps.
Dallara added that he hopes to reach a basic agreement with the Greek government by the end of this year.
Some analysts fear that a debt swap, in which private investors abate some of their Greek sovereign debt holdings, could trigger a credit event or a financial meltdown. The IIF agreed on behalf of bondholders last month to implement a 50% reduction in the nominal value of Greek bonds, via a ΄haircut΄.
The IIF represents the interests of more than 400 financial institutions and has played a key role in negotiating the terms of Greece΄s debt haircut, the exact terms of which are being hammered out by the IIF, bondholders, and Greek officials.
(source: Dow Jones)