Top of the Agenda: EU Leaders Decide New Greek Bailout
At a summit to tackle the eurozone’s ongoing sovereign debt crisis yesterday, European officials agreed on a new $157 billion bailout (FT) package for Greece. Most notably, the plan calls for an additional $53 billion in contributions by private bondholders, expected to lead to a selective Greek default.
Eurozone leaders also agreed to an expansion of its $634 billion bailout fund (WSJ), which will now be authorized to buy eurozone bonds on secondary markets and to lend directly – at lower rates – to troubled countries before they lose access to market financing, as happened with Greece, Ireland, and Portugal over the past year.
The development of the bailout fund was part of an effort to create stronger eurozone governing mechanisms (Guardian) and contain the threat of sovereign debt contagion to vulnerable countries like Italy and Spain.
Yesterday’s agreement was a victory for French President Nicolas Sarkozy, who has called for the creation of “European Monetary Fund,” and German Chancellor Angela Merkel, who has been adamant that private creditors contribute to a second Greek bailout. The Franco-German compromise (DerSpiegel) was a rebuke of European Central Bank President Jean-Claude Trichet, who argued forcefully against any plan that could see Greece default.
The draft agreement to hold together the eurozone probably won't quell financial panic, but it's a start, says this Guardian editorial.
The Economist reviews yesterday’s eurozone summit, and the fierce political wrangling that finally led to an agreement on a second Greek bailout.
Yesterday’s agreement is a small, but important, step forward for the eurozone, putting it on a path towards fiscal integration and a monetary union, writes TIME’s Leo Cendrowicz.
A growing sovereign debt crisis highlights the role of politics in the markets and the need to find common, EU-wide solutions, says Franco Pavoncello, president of Rome's John Cabot University, in this CFR Interview.