Default yes, default no. Among the many conflicting opinions on the Greece case, the fiercest clash in recent days is the one between rating agencies and the International Swaps and Derivatives Association (ISDA), the international body that represents the financial institutions issuing CDS. The former, as usual, do not make discounts.
After the publication of the plan established by the countries of the Eurozone to save Athens, which also involves private individuals, last Friday Fitch had threatened the downgrading of Greek government bonds, equating the renewal and extension of bonds with a declaration of insolvency. Today however it was Moody's turn, which without too many words cut the Greek rating from Caa1 to Ca, just one step above the default level.
On the other side of the fence is ISDA, which does not consider the measures established in Brussels as inevitable causes of default. And it shouldn't be surprising: if Athens really went bankrupt, it would trigger a rain of compensations to be paid on credit default swaps, insurance securities that precisely cover the risk of insolvency. According to data from the Depository, Trust and Clearing Corporation (updated to 15 July), 3,24 billion euros are at stake.
In short, Isda is now in dire straits. To ease the pressure, a spokesman for the institution said that the plan to save Greece established by the Eurozone "does not appear to contain any elements capable of involving the CDS". As for the participation of private individuals, "to the extent that it is voluntary, it should not trigger the CDS". In any case, ISDA noted that at the moment the new plan remains at the level of a proposal, and that it will officially comment on its implications only when it has been formally adopted”.
