Part of the agreement with the euro zone nations that Greece signed off on in order to receive $110 billion in bailout cash was to renegotiate with private creditors, swapping their bonds for new ones at 50% face value of the old ones.
But the private bond holders appear unconvinced that Greece can even make good on those much reduced yeilds. Hence, the talks being held to come to an agreement about the structure of the bond swap are near collapse.
Talks between Greece and its creditor banks to slash the country's towering debt pile broke down on Friday, with the Greeks warning of "catastrophic" results if a deal to swap bonds is not reached soon.
The sides remain divided over the interest rate Greece will end up paying, which determines how much of a hit banks take.
Athens needs an agreement, seeing creditors voluntarily giving up a lot of their promised returns, to reduce its debt to more sustainable levels and convince the European Union and International Monetary Fund to keep lending it cash.
Both sides appeared to be digging in their heels, in what analysts said looked like a high stakes poker game in a final attempt to convince private bond holders to take some losses to avoid a disorderly default.
It would come via a swap between old bonds teetering on the brink of default and new ones for which banks would take a big hit. Without a deal, banks could lose even more and Greece would be threatened with default and possibly euro zone ejection.
"Discussions with Greece and the official sector are paused for reflection," said the Institute of International Finance (IIF), which leads talks for private bond holders.
"Unfortunately, despite the efforts of Greece's leadership, the proposal put forward ... has not produced a constructive consolidated response by all parties."
That last is bureaucrat-speak for "the lying sons of guns are trying to hold us up." Indeed, as Reuters explains, the issue is not the face value of the bond:
"The main problem was the (European Union and International Monetary Fund's) insistence on a coupon lower than 4 percent on the new bonds," the banking source said.
It could mean an accounting loss of more than 70 percent for banks on their books, far more than the actual 50 percent cut in the original value of the old bonds laid down in the original deal.
Under the terms of the October plan, bondholders would take a 50 percent hit on the notional value of the old bonds. But the actual losses on their books depend on coupon and maturity, and could be far higher.
Although Greece has until March 20 to get the deal done when a $14.5 billion euro bond comes due, the paperwork alone will take 6 weeks. That means the parties have less than a month to come to an agreement.
Given the glacial pace and possible collapse of the talks, that isn't much time at all.