EU Leaders Reach a Deal on Greek Debt

by Marilou Moursund on October 27, 2011

in Banks,Credit Crisis,Debt,Foreign Markets

The futures are soaring on news that the EU leaders have reached a deal on a voluntary haircut on Greek bonds of 50%.  They have also agreed to increased capital levels in the banking system.  Because the write-down is voluntary, most commentary notes that it won’t trigger payouts on credit default swaps.  Here is an excerpt from the joint statement:

1. Over the last three years, we have taken unprecedented steps to combat the effects of the world-wide financial crisis, both in the European Union as such and within the euro area. The strategy we have put into place encompasses determined efforts to ensure fiscal consolidation, support to countries in difficulty, and a strengthening of euro area governance leading to deeper economic integration among us and an ambitious agenda for growth. At our 21 July meeting we took a set of major decisions. The ratification by all 17 Member States of the euro area of the measures related to the EFSF significantly strengthens our capacity to react to the crisis. Agreement by all three institutions on a strong legislative package within the EU structures on better economic governance represents another major achievement. The introduction of the European Semester has fundamentally changed the way our fiscal and economic policies are co-ordinated at European level, with co-ordination at EU level now taking place before national decisions are taken. The euro continues to rest on solid fundamentals.

2. Further action is needed to restore confidence. That is why today we agree on a comprehensive set of additional measures reflecting our strong determination to do whatever is required to overcome the present difficulties and take the necessary steps for the completion of our economic and monetary union. We fully support the ECB in its action to maintain price stabilityin the euro area. Sustainable public finances and structural reforms for growth

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