Germany and France won the battle in trying to save Greece!

[Latinoking]

Eurozone leaders have reached a "three-pronged" agreement they say is vital to resolving the region's debt crisis. As part of the deal, banks have agreed to take a 50% loss on Greek debt. That has removed a major obstacle in European efforts to stabilise the problem. The announcement helped lift the euro as investors were more optimistic about the outlook for the region's growth and single currency. "The result will relieve the whole world that was expecting a decision that was strong from the eurozone," French President Nicolas Sarkozy said at a press conference in Brussels. Fears about the state of the eurozone's finances and the threat of a break up of the single European currency have been stalking markets for months. Critics have accused policymakers of not doing enough to resolve the issues, contributing further to the problems and fuelling uncertainty. In an effort to reassure markets, eurozone leaders have been trying to hammer out a deal what would help Greece put its national finances in order and underpin other European economies such as Italy. As part of Thursday's deal, the eurozone leaders have also called on the region's banks to increase the amount of money they hold on their books. At the same time, they are also planning to boost the power of a region-wide rescue fund.

 

http://www.bbc.co.uk...europe-15472547

 

It's very interesting that finally something is being done about Greece. I guess either Germany and France have high morals or they believe that something can be gained from helping Greece. What you guys think? Also, when will it be time to help out Spain, Italy, and Ireland?

[Will H]

It's neither. This has nothing to do with morality, and bailing out Greece will cost the Eurozone a lot of money. The reason they did it is because not bailing them out will cost them even more money. It's averting a disaster by making a sacrifice, but it's Greece's duty to the rest of the world to get its finances in order the best it can. As Cameron said, "It's in our best interests".

 

Hopefully the other countries shouldn't actually get into the state Greece did, the UK sent a significant loan to Ireland a while ago which should help them get along, but Italy and Spain we can only hope and pray about right now. It doesn't help that all of these countries have erroneously taken on the mismanaged and conceptually flawed Euro, but we have to live with it because breaking it up now would make it even worse.

[Crocefisso]

Very valid points made by Will there. The UK knew it had to get involved because of our reliance upon Europe as one of the main markets for our exports, the shock-waves of a Greek default on the mainly European banks holding Greek debt would furthert damage our export prospects, and then there are contagion considerations.

 

Politically, I hope this is the beginning of a proper political and fiscal union for the euro because, as Will quite rightly pointed out, scrapping it would be a disaster, and yet it's been unanimously agreed for months that something needs to be done. Even now, though, Merkel seems to be stalling (as she has taken to doing this year, for some reason) and Sarkozy, who is almost certainly going to lose the election next year as far as I can see, is being cautious given his incredibly low popularity.

[magekillr]

I don't know that this will fix it. I'm waiting to read some experts' opinions first. The only one I've seen is Yves Smith. As usual, she's critical:

 

Consider what this means: the part of the bargain that was the focus of the negotiating effort, the haircut on a voluntary Greek restructuring, has been agreed upon only at a high concept level. Remember that the earlier deal, a 21% haircut, was supposed to get a 90% participation rate, then the officials decided they could live with 80%, but the uptake rate came in at roughly 75%. Will the IIF do a better job of delivering its members this time? There was some bizarre face saving bluster in the official presentation. The officialdom had clearly wanted a 60% haircut, so beating them back to 50%, with details to be sorted out (which if the US is any guide, will work to the advantage of the financiers).

 

I doubt that anyone with an operating brain cell thinks the Eurozone leaders were willing to break the banks. And the overall scheme, in particular the €1 trillion+ rescue facility, as we have discussed in prior posts, is unworkable unless real money comes in. That either means the ECB, which the Germans are dead set against, the IMF, which will contribute but not on a scale to be sufficient, or China. Bloomberg said that Sarkozy was going to call Chineser president Hu Jintao to hit him up for funding tomorrow.

 

Even though this plan, such as it is, has lots of gaps, including an insufficiently large rescue facility (Sarkozy’s brother Olivier, head of the financial services group at Carlyle, in an FT op ed earlier this week, estimated the total required for banks alone to be $2 trillion, or €1.4 trillion, and that’s before you add in sovereign rescue requirements).

 

Mr. Market is nevertheless cheered by this sketchy, flawed outline. Most Asian markets were up over 2%, the Dax is over 3% higher, the FTSE has nearly 2% in gains, and the euro is close to 1.40. Perhaps the Eurocrats can keep these “get us through the next crunch” rescue packages going, but each deal seems to be harder to push over the line.

 

Eurozone Leaders Agree a Few Rescue Details, Like 50% Haircut on Greek Bonds; Plan to Develop a Plan Gooses Markets

 

The US also returned to its pre-recession peak growth numbers of 2.5%. This isn't enough to get us back to full employment, or close the output gap indefinitely into the future, but at least it alleviates fears of a double dip. Hopefully that will also help Europe.

[Crocefisso]

Of course this won't fix the issue, but it at least buys the Eurozone, and wider European economy, time in which to enact the sorts of measures that can fix the issue. I'm relying on the assumption that Eurozone leaders will continue resisting their seemingly innate desire to avoid the issue, which they managed to do quite well lately.

 

As for the US: if it's good for America, it's good for the world. (Economically speaking).

[transcript80]

This is no solution yet. Until the weaker souther european countries cut their expenses and reduce debt, we are not safe.

 

Berlusconi is just stalling because he want to end the year in office (I think it has something to do with him possibly being sued) and he is not doing anything at all at the moment.

 

Sarkozy admitted that it was an error to have Greece in the monetary union to begin with... Too bad it's too late now, despite the critical voices in the early 2000s that warned the politicians.

 

All in all, the euro is a prestige project that turned bad.... and now we are stuck with it.

[Will H]

And Sarkozy would be exactly right. Greece, according to the criteria made in the EU, shouldn't have recieved permission to adopt the currency in the first place. Of course, stupid emotive ideas like a 'united Europe' seemed to take precedence over cold hard fact that this would end in disaster.

 

The EU should have learned to say 'no' before it was given the ability to say 'yes'.

[das1330]

Took long enough. Europe's inability to make these basic decisions has been dragging the world economy down for some time now.

[i_love_burritos]

Took long enough. Europe's inability to make these basic decisions has been dragging the world economy down for some time now.

However valid your insight may be, I find it hilarious coming from an American.

[magekillr]

Took long enough. Europe's inability to make these basic decisions has been dragging the world economy down for some time now.

However valid your insight may be, I find it hilarious coming from an American.

 

LOL! Well done. Yeah, let's see you come up with a decision UNANIMOUSLY, snipersas. Especially after the US' debt debacle. Big decisions in Europe need to be made by unanimous vote of all 27 EU members, even those that arent part of the euro.

[Crocefisso]

Took long enough. Europe's inability to make these basic decisions has been dragging the world economy down for some time now.

However valid your insight may be, I find it hilarious coming from an American.

Indeed.