Investors face deadline to prevent Greek default

A woman observes a TV screen displaying information on Greece, Portugal and Spain's government bonds in a street of Paris, on May 10, 2010. Now, Greek bond holders must decide to take a big loss on their investments as Greece teeters close to default.

Bob Moon: The investors who've lent Greece money are deciding today whether the plan to save the country is acceptable. Private bond holders have until this afternoon to decide if they'll take major losses on their investments in order to keep Greece out of a messy default, and avoid another global crisis. All signs this morning point to optimism.

The BBC's Mark Lowen is in Athens covering the ongoing Greek debt crisis and he joins us now. Hello.

Mark Lowen: Hi there.

Moon: Well, if, as we've heard, Greece defaults and the whole financial system is at risk, why isn't this just a done deal?

Lowen: Because the bond holders are being asked to take a huge hit; they are being asked to take a hit of over 50 percent on the loans that they have to Greece. So, even though the major European banks that are involved in this, they say that they will accept it, smaller bond holders -- the hedge funds, the investment funds -- they're not happy about it. They want a better deal. The Greek government is saying there will be no better deal, because they say that they simply don't have the money to pay the original bond holders.

If it is to default, in a sense -- if the mechanism is forced through to impose this cut on those who don't want it -- then what's likely to happen is something called credit default swaps. That's basically insurance on the original bonds. They played a large roll in the 2008 financial crisis; they brought down the insurance group AIG. So if they came back into play now -- that is something that eurozone leaders really want to try to avoid.

Moon: But quickly then, there seem to be more and more takers at this point?

Lowen: There does seem to be a growing number of takers. It's not yet a done deal though. There's going to be a lot of haggling today until the deadline, and we'll just have to see whether Greece manages to reach this deadline. And whether the debt level can begin to be reduced -- or if it fails all together, whether Greece would be teetering again towards the prospect of a disorderly default on its debt, which is something that would spread contagion throughout the eurozone.

Moon: The BBC's Mark Lowen in Athens. Thank you very much for joining us.

Lowen: My pleasure.

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