Home Economy The Deal Is Done

The Deal Is Done


After lengthy negotiations (many would say interminable), the eurozone has been pulled from the mire – at least for a while. The global markets have responded with more than a heartbeat for once, and although no one believes this to be the final plaster on the wound, it has stopped the bleeding.

After the smirking and rankling of European leaders (Sarkozy) that have been less than diligent with their finances, a deal has been struck with the 17-member euro nations and it can be elucidated in several key points, none of which are that surprising. Firstly, the banks holding Greek debt must write off 50%; secondly, the European Financial Stability Facility (the ‘big bazooka’ bail out fund) is to increase dramatically (details will take longer), and finally ‘Banks must raise more capital to safeguard future government defaults’ as was cited on the BBC.

So, all clear then, right? Not quite. As Robert Peston, BBC Business Editor sagely observed, “What doesn’t augur well is that even with this painful cut for banks, Greece’s public-sector debt will still be a hefty 120% of GDP in 2020, or roughly twice the ratio deemed to be economically healthy and sustainable.” Reiterating the fact that private sector write-offs only account for a small percent of what Greece owes. And, of course, there is still the continuing concern with Spain, Portugal and Italy; the fear that they will still bring the whole house of cards down. While this is a positive move by the eurozone (and necessary), we must remember that this is a perennial juggling act of all of the seventeen nations and there is still huge work to do.

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William R. Feins , freelance journalist from London, UK; he received his B.A. degree in Economics and his Masters in Sociology. William has always been interested in the mechanics of business and the inspiration of original thinkers, and firmly believes that the former can’t succeed without the latter. In his spare time, he enjoys the ridiculous spectacle of watching table tennis on a big screen (preferably at a pub) and reading weighty tomes about World War II.

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