Hedge Funds battle IMF on Greek Sovereign Debt Position

Powerful financial institutions known as Hedge Funds are taking a defiant stand against the International Monetary Fund in order to protect their financial investment positions in Greek sovereign debt as the EuroZone crisis lingers.

As part of a deal reached last year, European banks and hedge funds were asked to forfeit about € 100 Billion worth of their holdings in the financially troubled sovereign’s debt. However as the time comes for those plans to materials, many Hedge Funds would rather not.

The alternative to this course of action drawn up by leaders of the Euro Zone and IMF is for Hedge Funds to allow Greece default on the debt; this will in turn allow the Hedge Funds to collect credit insurance on the default.

European leaders meeting on Monday had said the deal was to be “finalized shortly”. However European Banks are also reluctant to accept the deal, after an initial agreement due to different estimations as to what the face values of the bonds are.

European banks are more likely to come to terms eventually, and had already initially done so after being pressured by politicians in their region. The real challenge lies in whether hedge funds will accept the deal or not. It seems highly likely that a good number of hedge funds will not accept the deal and will wait for some sort of payout either from Greece or from credit insurance.