EU: 50% Writedown on Greek Bonds

October 27th, 2011

Update: Why The Latest Eurozone Bail-Out Is Destined To Fail Within Weeks

—End Update—

Hooray! Can kicked down the road another five feet.

Via: Washington Post:

European leaders moved early Thursday to stem the debt crisis gripping the continent by agreeing to a plan that imposes steep losses on investors holding troubled Greek bonds and boosts the firepower of the region’s bailout fund to at least a trillion dollars.

After marathon negotiations that continued well past midnight, European leaders said banks and other major investors in Greek bonds agreed to take losses of up to 50 percent. This concession was meant to help prevent the Greek government from defaulting on bills it cannot pay and avoid an even costlier shock to the European financial system.

The losses are much larger than private investors accepted under a deal this summer. Since then, Greece’s economy has steadily eroded, making it even harder for the government to repay its bonds.

The question of how to structure a new refinancing plan for Greece and divide the costs of rescuing it has been at the center of negotiations. Other elements of the plan were dependent on European officials reaching an agreement with negotiators for major banks, which had been balking at taking bigger losses.

Under the deal, the bailout fund, known as the new European Financial Stability Facility, would help cash-strapped countries such as Italy and Spain borrow at least a trillion dollars by providing a kind of insurance that would make their bonds more attractive to investors.

The breakthrough at a summit meeting in Brussels came hours after leaders announced they had agreed on measures to shore up the region’s banking system. The 27-member European Union said banks would be asked to raise perhaps $150 billion in new capital as a buffer against possible losses on their holdings of European government bonds that have declined in value.

Related: Euro Rallies to 7-Week High

Posted in Economy, Elite | Top Of Page

One Response to “EU: 50% Writedown on Greek Bonds”

  1. Crates says:

    hey, I know that no one is asking, but in my opinion, seems the world would be a better place if the whole fiat currency/banking boondoggle were simply altogether brushed off into the dustbins of history.

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