IMF's Lagarde: Greece's Default Not An Option

PARIS (Dow Jones)--The head of the International Monetary Fund said Tuesday a default by Greece was not an option, even as negotiations between the debt-laden country and its creditors appeared to be deadlocked.

The default of Greece "would not be envisageable," IMF Managing Director Christine Lagarde said, speaking in an interview with French television channel France 2.

Still, markets are increasingly expecting Greece to default on its debt obligations. Negotiations between private bondholders, Athens and euro-zone officials on financing and debt write-downs are gridlocked. Time is quickly running out for a deal to be done, as Greece faces a EUR17.5 billion in bills and bonds coming due in March.

The IMF fears that a default in Greece could cause borrowing costs to shoot up in other ailing euro-zone countries, such as Italy and Spain, to levels that require bailout loans. Also, the fund says euro-zone banks don't have enough cash on hand to cover losses from a Greek default, and the subsequent mayhem could create another global financial crisis.

more: http://online.wsj.com/article/BT-CO-20120124-712827.html

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I think there will be a deal eventually to avoid an ugly uncontrolled default but regardless whatever deal comes out of this it wont be pretty.