July 21, 2011
As they paraded out of their summit chamber late Thursday to hail their new €109 billion ($157 billion) debt deal for Greece, Europe's leaders all wore bullish I-told-you-so expressions, aimed squarely at the doubters who questioned whether there was any political will left to save the beleaguered euro from oblivion.
The agreement to restructure Greece's crippling debt came after weeks of dithering by the 17 euro-zone governments. But after the announcement of the agreement in Brussels Thursday, French President Nicolas Sarkozy called the decisions Europe had taken to protect Greece "mighty and weighty." German Chancellor Angela Merkel added that the deal, struck at the end of an eight-hour summit, "means more certainty for our common currency and so a more solid basis for our business and our economy in general." It also meant that after nearly two years of often ineffective responses to its financial calamities, the euro zone appeared to be moving toward the sort of fiscal cohesion that supporters hope will leave it far better able to deal with such crises in the future.
The 16-point package includes an agreement by Greece's private-sector creditors to accept a write-down of about €37 billion ($53 billion) through debt swaps and rollovers. This is seen as a victory for Merkel, who had long argued that private lenders should take a hit on the debt alongside governments. The process is likely to trigger a selective default, as private investors "voluntarily" agree to the haircuts. But it's still a default as far as ratings agencies are concerned, which the European Central Bank had attempted to avoid at all costs. "The demand to prevent a selective default has been removed," Dutch Finance Minister Jan Kees de Jager said.
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