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Europe, explained
 

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Look at this bag of insults. (SAKIS MITROLIDIS/AFP/Getty Images)

For the last three weeks I have been working on a series of articles that will appear on GlobalPost shorty about the alarming rise of xenophobic ultranationalism in eastern Europe. Nazi worship is not just for the fringe out there.

While I was on assignment the deal for Greece's second bail-out was agreed but I knew there would be plenty left in the story to blog about when I came back to it.

Sure enough, today, from Germany to Britain there are stories questioning whether the deal will go through. Not because of the Greeks, or their euro zone partners but because the private holders of their debt have not completely agreed to its terms. This would require them to swap their current bonds for those that would mature later. The value of these new bonds would be up to 75 percent less than the face value of the bonds currently held.

It was being reported at the start of the day that more than a third of these private bondholders would reject the deal.

Sometime this afternoon a memo from the Institute of International Finance, which had negotiated for the private bondholders over the last few months, was obtained by the Athens News. In no-nonsense prose it details the dire consequences for those who hold out.

Top line: failure to do the swap would lead to a Greek default and a cumulative trillion euros of losses to the world's financial institutions. That's $1.32 trillion and even in these times that is a lot of money. Everyone's boat gets swamped in that scenario, even short sellers who thrive on volatility.

Anyway, the memo's release seems to be concentrating minds. Most European banks with big holdings of Greek debt have all agreed to take the haircut.

The deadline for private bondholders to decide is Friday.

I imagine I will be revisiting this story once or twice before then.

http://www.globalpost.com/dispatches/globalpost-blogs/europe/greek-debt-crisis-next-hurdle-looming