Lead negotiators Charles Dallara and Jean Lemierre – co-chairs of the steering committee of the Institute of International Finance (IIF), an industry body representing private investors – flew out of Athens, claiming other parties to the agreement could not meet their terms.

The development, which appeared to be a high-stakes negotiation tactic by private creditors, came against feverish speculation that rating agency Standard & Poor's was on the verge of downgrading the credit ratings of France, Austria, Spain and Belgium.

The private investors had tabled a proposal involving a 50% nominal reduction of their holdings in Greece’s sovereign bonds and up to €100 billion of debt forgiveness; but the EU-IMF are looking for a greater sacrifice.

High stakes in Athens

The creditors and the governments are haggling over details of the exchange—most importantly the vital issue of how much interest will be paid on the new bonds. That affects how much cash the governments have to lend Greece so that it can pay it back.

In its statement, the steering committee praised the Greek government's leadership, and sources told EurActiv that the private creditors were pinning the blame on the EU-IMF creditors, for being unable to agree the terms of the deal.

It said discussions were "paused for reflection on the benefits of a voluntary approach", but sources told EurActiv that the talks could resume – and the negotiators return to Athens next week – depending on developments over the weekend.

The stakes are high. Indeed, if a voluntary debt write-off is not agreed, the likelihood of an outright default by Greece increases.

Meetings of the European creditor nations were still understood to be in session late on Friday after the departure of the private creditors.

Dramatic gesture, designed to corner parties?

The dramatic gesture, which caused a flurry of media speculation that Greece was inching closer to default, bore the hallmarks of high-stakes negotiating tactics.

Although presented by some as a “collapse in negotiations” it might just as easily signify that a deal is close to agreement, with the private creditors using strong-arm tactics to deliver a more favourable outcome for their large investment bank and hedge fund clients.

The development came amid feverish speculation that Standard & Poor’s, the rating agency, was on the verge of downgrading Austria and France from its triple-A credit rating, which would in turn endanger the rating of the EU’s financial stability facility (the EFSF). It seems that the credit rating agency will also strike Belgium and Spain. None of the reports seemed to give a clear indication of the scale of downgrades.