Another day, another summit

Economist
October 21, 2011

If only economic productivity were measured in summits, all Europe's problems would be solved. Earlier in the month, we were promised that a "final" deal would be reached on Sunday, October 23; now it seems that the October 23 meeting will just discuss options for the "final final" summit on Wednesday.

There are generally agreed to be three vital components of any deal. Greek debt must be written down; banks must be recapitalised; and the European Financial Stability Facility must be beefed up so that it has the firepower to stand behind Italy and Spain.

There are doubts on all three fronts. The writedown on Greek debt needs to be increased from 21% to perhaps 50% or 60%. But how to do that while involving private sector creditors and still keeping the "voluntary" nature of the deal? If the deal becomes "non-voluntary", the risk is that creditors of other euro zone countries will take fright.

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