Greece will default on its debt obligations, senior figures at Standard and Poor's and Fitch, the rating agencies, said, as the country prepares for another round of negotiations with its private sector creditors.
The "Private Sector Involvement" (PSI) plan revolves around finding a voluntary agreement to cut the value of investors' bonds dramatically - an earlier deal in October 2011 put the amount at 50% - in order to reduce the country's overall debt and give it a better chance of returning to solvency. The alternative would be a default - which would see investors lose their money and Greece lose its ability to raise capital on the markets.
The PSI talks are a condition of a second EU-International Monetary Fund (IMF) bailout package, totalling €130bn. Without a successful PSI there will be no bailout money, and without bailout money there is a high chance that the country will be unable to service the more than €14bn of loans that mature at the end of March.
Charles Dallaire, co-chair of the Private Creditor-Investor Committee (PCIC) of the Institute of International Finance (IIF), which is negotiating on behalf of private sector bondholders returns on Wednesday.
Lucas Papademos, Greece's prime minister, will join the talks, having acknowledged that the price of failure would be a default, and possibly the exit of the country from the euro.
In a CNBC interview on Monday, Papademos reiterated his and his country's desire to stay in the eurozone, and said that he was confident that the negotiations could be successfully concluded.
Others are less convinced. Moritz Kraemer, the head of European sovereign ratings at Standard & Poor's, which downgraded nine eurozone countries on Friday, and the European Financial Stability Facility (EFSF) on Monday, told Bloomberg on Monday that it was far from clear that the negotiations would result in an agreement and suggested that a default was imminent.
At Fitch, Kraemer's counterpart Edward Parker reportedly told Reuters that Greece was insolvent and that a default was "going to happen."
To stop an uncontrolled default could require either a massive bond-buying initiative by the European Central Bank (ECB) or more money being made available by EU countries, BNY Mellon strategist Simon Derrick said in an email.
"To avert [an uncontrolled default] either the ECB or the other Euro-zone nations would therefore have to step into the breach. Given that the ECB remains adamantly opposed to breaching its mandate by becoming a direct lender of last resort to sovereign nations we must therefore assume that the last line of defence for Greece in the current struggle must be the other members of the eurozone," Derrick said.
With serious pressure on other sovereigns' finances, it seems unlikely that the latter option is a possibility. Senior members of the Greek government are due in Washington for talks with the IMF - believed to be an attempt to have the bailout money freed up even if the PSI fails - but, Derrick added, it could be too late.
"Whether the talks this week in Washington and Athens succeed or not remains to be seen," he said. "However, it seems reasonable to start planning for the possibility of a Greek default in March and possible even an exit from the single currency."