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Sunday, July 10, 2011

Report: EU to consider Greek Default

by Calculated Risk on 7/10/2011 10:12:00 PM

From the Financial Times: EU stance shifts on Greece default

The Financial Times is reporting that European leaders will now accept that "Athens should default on some of its bonds" to reduce the overall debt burden of Greece.

This would be a major shift. The Financial Times suggests this will be discussed at the meeting of finance ministers on Monday and probably ends the plan suggested by France.

From the Irish Times: European leaders to consider default as part of Greek rescue

EURO ZONE finance ministers are considering a fundamental revision of their strategy in the Greek debt crisis ... At issue as the ministers meet today in Brussels is whether they agree to look again at a German debt-swap plan in which Greek investors would be urged to exchange their bonds for debt with a longer maturity.

This plan was scrapped weeks ago on the basis that it would lead to a default rating on Greek debt, something which is resolutely opposed by the European Central Bank.
Also on the table is the revival of a plan rejected four months ago in which the euro zone bailout fund — the European Financial Stability Facility — would intervene in markets to buy Greek debt at a discount to its original value.

Consideration may also be given to another lowering of the interest rate on Greece’s rescue loans.
Another interesting week in Europe.