The haircut for private holders of Greek debt may now be 65-70%. They may be given a flimsy rollover of some debt, but none of this will help Greece. It’s debt load will be 120% of GDP after this, and they can’t pay that either.
Some debt holders are threatening to sue if credit default swaps aren’t triggered. The central banks want to prevent this by a sleazy ploy of saying the hairsuts are voluntary. Thus CDS would not trigger.
CDS are private transactions that are pseudo-insurance. I buy Greek debt then hedge it by buying a CDS. The seller guarantees the money if there’s a default and collects a premium from me.
The problem is, not only are there trillions in CDS swaps out there, no one knows who owns them (except the buyer and seller) so no one knows where the risk is. In the effect of a credit event, this makes everyone very twitchy.