Euro-Area Leaders May Accept Greek Default (Eurozone Summit) [View All]

[Ghost Dog]

Source: Bloomberg

July 21 (Bloomberg) -- ... Spooked by a bond market selloff last week, leaders empowered their 440-billion euro ($633 billion) rescue fund to buy debt across stressed euro nations after eight hours of talks in Brussels. The fund can also aid troubled banks and offer credit-lines to repel speculators. Leaders pledged a 160 billion euro aid package for Greece, eased the terms of its existing loans and cajoled bondholders into footing part of the bill.

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“These measures are welcome because they create the best possible conditions for Greece and other peripheral countries to put their houses in order and hence limit the risk of contagion,” said Marco Valli, chief euro-area economist at UniCredit SpA in Milan. “Still, the market will continue to price some probability that troubled countries will not be up to the challenge. Implementation risks to debt reduction are still considerable.”

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Today’s package still doesn’t “make a significant dent” in Greece’s debt and may disappoint investors by failing to boost the size of the rescue fund, said Jonathan Loynes, chief European economist at Capital Economics Ltd. in London. “We doubt that this package alone will bring an end to recent contagion effects and prevent the broader debt crisis from continuing to deepen over the coming months.”

For now, Merkel and her allies have succeeded in their drive to make investors co-finance bailouts after voters balked at the cost of saving spendthrift nations. Banks said they will participate in bond exchanges and buybacks to help Greece, with the leaders estimating their contribution at 37 billion euros.

Read more: http://www.bloomberg.com/news/2011-07-21/euro-area-leaders-may-accept-greek-default.html

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( See also: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x88754 )

Full Statement:

We reaffirm our commitment to the euro and to do whatever is needed to ensure the financial stability of the euro area as a whole and its Member States. We also reaffirm our determination to reinforce convergence, competitiveness and governance in the euro area. Since the beginning of the sovereign debt crisis, important measures have been taken to stabilize the euro area, reform the rules and develop new stabilization tools. The recovery in the euro area is well on track and the euro is based on sound economic fundamentals. But the challenges at hand have shown the need for more far reaching measures.

Today, we agreed on the following measures:

http://www.telegraph.co.uk/finance/financialcrisis/8653614/Eurozone-debt-crisis-the-statement-in-full.html