Private bondholders had their holdout position of requiring a 4% interest rate on new Greek bonds rejected Monday, as eurozone finance ministers said the offer was not good enough.

Lack of an agreement increases the chance of a possible default by Greece; if it fails to win concessions that allow it to receive its next bailout, it will default on loans in March.

In a Monday meeting, Reuters reported that banks and other private institutions, represented by the Institute of International Finance, insisted that they must have a 4% interest rate on any bonds to be exchanged for those they currently hold, if they are to write down the value of those bonds by 50%.

Greece, however, said it was not in a position to pay more than 3.5%, and eurozone ministers supported that stance. The International Monetary Fund also backs an interest rate of no more than 3.5%.

In a statement, Jean-Claude Juncker, chairman of the eurogroup countries, said, “Ministers asked their Greek colleagues to pursue negotiations to bring the interest rates on the new bonds to below 4% for the total period, which implies the interest comes down to well below 3.5% before 2020.”

Greece and its creditors apparently are making some progress, however, all appearances to the contrary; in the report, unidentified sources were cited saying that failure to agree was over questions of how much Greek debt would be reduced, and whether it would reach a level that European governments consider sustainable. To do that, private bondholders will likely have to accept real losses of 65-70%, which would bring nominal losses down to 50%.

A banking source in Athens was quoted saying, “There will likely be an updated debt sustainability analysis that will be discussed at the Eurogroup. Talks will continue this week. The aim is to have an agreement by late next Monday.”