The euro fell to a 16-month low against the dollar after signs that the agreement, designed to put the country’s public finances on a sustainable path, might be derailed.

European leaders reached an agreement last October with the Institute of International Finance (IFF), the global banking lobby group, that Greek bondholders should suffer a “voluntary” 50 per cent haircut, on the value of their investments.

While large European banks have agreed to the deal, several hedge funds are believed to be holding out in the belief that the European Union and the International Monetary Fund will have no choice but to pay them off in full if they refuse to play ball.

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