27 Oct European Leaders Strike Deal to Slash Greek Debt
European leaders have struck a deal with Greek debtholders to slash the country's debt down to 120% of its GDP by the end of the decade, however the deal will require private investors to take a 50% cut in the value of their bond
in the process.
Talks have also led to a new €130 billion bail-out fund of Greece by the International Monetary Fund and the European Union, which led to the Dow Jones index jumping by 140 points within minutes of news of the deal breaking.
German chancellor Angela Merkel claims that the debt agreement can only work if
the private sector steps up to the plate. She said "The world has its eyes on us."
However the Centre for Economics and Business Research (Cebr) have claimed that many foreign investors won't take such a drop in the value of their bonds lying down, with Cebr chief executive Douglas McWilliams claiming "European leaders might see this as a Machiavellian move so that when the other sovereign debt writedowns occur, the losses will accrue to Asian and Middle East investors.
"But these guys are probably too smart to be fooled in this way and will demand a heavy price if they agree to be involved. The Greek haircut looks about right, but unless the Greek economy can be restored to growth and prevented from running up new borrowing, it does not solve the underlying problem which is a deeply uncompetitive economy."