Greece's creditor banks broke off talks after failing to agreewith the government about how much money investors will lose byswapping their bonds, increasing the risk of the euro-area's firstsovereign default.

Proposals put forward by a committee representing financialfirms have “not produced a constructive consolidated response byall parties,” the Washington-based Institute of InternationalFinance said in a statement today. “Discussions with Greece and theofficial sector are paused for reflection on the benefits of avoluntary approach.” The government said the two sides willreconvene discussions in five days.

Greek officials and the nation's creditors agreed in October toimplement a 50 percent cut in the face value of Greek debt, with agoal of reducing Greece's borrowings to 120 percent of grossdomestic product by 2020. More than two months after the accord wasannounced, the two sides still need to agree on the coupon andmaturity of the new bonds to determine the total losses forinvestors.

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