Let's face facts - the Greek Debt swap is going to be a failure

http://www.telegraph.co.uk/finance/debt-crisis-live/9008923/Debt-crisis-live.html

10.14 If the number of creditors who sign up for a voluntary bond swap to cut Greece's debt burden is too low then the country may need more bail-out cash from Europe, says deputy finance minister Filippos Sachinidis.

But what exactly does "enough" mean? Judging by his statement on radioSkai this morning, it sounds like "all" would be more accurate:

If the percentage of participation is not, for instance, 100pc, then Greece may need further support from the side of our partners to [the] cover financial gap.

The comments come ahead of talks on the bond swap in Athens on Thursday between Charles Dallara, the head of a group representing private-sector banks, and Greek government officials including the finance minister and the prime minister.

Let's not jump ahead and let's see how we can seal the technical agreement in such a way that it ensures two things. First, a high participation rate and a voluntary participation in the bond swap programme and secondly, that Greek debt ends up with characteristics that allow analysts monitoring and examining its viability to conclude that after this procedure it is sustainable.

    If the greek debt swap goes poorly , what is the impact on the second greek bailout ? 

Elsewhere, Christine Lagarde has warned that either Europe needs to find more bail-out cash for Greece or those who hold the nation's bonds will have to take a larger haircut. Both of these seem equally unlikely right now. The IMF also warns that Greece is stretched to the limit by austerity measures, so further savings are unlikely to be found.

     What is impacting the talks ? Why have they stalled , what is the likely outcome ?  From Acting Man , consider ....

Greek Debt Negotiations – No Progress Yet

For the umpteenth time we were told yesterday that the 'Greek debt negotiations are near to a conclusion'. This is announced by one or another eurocrat seemingly every other day. Alas, it appears the talks are stuck. There is a constant drumbeat of officials saying that the haircut must be greater than originally agreed upon, which is a direct result of the fact that the IMF/ECB holdings of Greek debt are exempted from haircuts.

This is ruining all chances for other weak borrowers in the euro area to return to the markets and threatens to produce a death spiral for Italy and Spain. As we have frequently pointed out, one can simply not trust anything the eurocrats say. This growing lack of credibility is a major impetus of the crisis.

Olli Rehn, Mr. Contray Indicator himself, is pleading for 'patience' – this is utterly bizarre in view of the fact that the eurocracy has been tinkering with the crisis for nearly two years now.  

“Greece is nearing an agreement with private-sector bond holders on a debt swap crucial to a second bailout package for Athens, the European Union's top economic official said on Tuesday.

EU Economic and Monetary Affairs Commissioner Olli Rehn also warned that the euro zone's financial crisis was not over, and urged financial markets to be patient for the fruits of reforms to avoid pushing the bloc into a liquidity crisis.

Some bankers have sounded sceptical over the private-sector participation for Greece, which the leaders of France and Germany on Monday reiterated was essential, and Rehn was cautious.

"We are about to finalise shortly negotiations on private-sector involvement, which is a necessary condition for the second programme," Rehn told the European Parliament. "It is not going to be easy but I am reasonably confident we will achieve this aim."

Greek Deputy Finance Minister Filippos Sachinidis said on Tuesday there was progress but no deal yet in the bond swap talks with creditor banks and reaffirmed Athens' aim for a voluntary accord that made the country's debt sustainable.”

Rumor has it that the EU is close to abandoning the farcical pretension that the debt deal is 'voluntary' on the part of creditors. The reason is that a number of hedge funds are insisting that the originally agreed terms be respected and rightly refuse to go along with the latest demand that they should bear even greater losses. Therefore, a coercive deal is  now on the table. It remains to be seen whether ISDA can then still maintain that CDS contracts on Greek debt won't be paid due to the allegedly 'voluntary' nature of the haircut.

Everybody is eager to wrap the talks up, but all the private sector bond holders  aside from the banks that are being coerced behind the scenes by their governments refuse to play along. The president of the Association of German Banks, Andreas Schmitz gave voice to the growing impatience yesterday:

“The Greek debt swap being negotiated between private bondholders and government officials should be implemented as quickly as possible, said Andreas Schmitz, president of the BdB Association of German Banks.

“It needs to finally be implemented,” Schmitz said at an event in Berlin today. “There can’t be constant delays and changes to the terms that were agreed upon.”

The crucial point is precisely that the Greek government and other agencies such as the IMF are once again trying to alter the agreed upon terms – evidently completely oblivious to the damage they are thereby producing for the entire euro area.