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Euro-chatter: reactions to the debt crisis summit

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As tensions heighten in Brussels we round up what has been said in the media so far today

Amidst fears of the Greek debt crisis spreading to Italy and Spain, EU leaders are finding it difficult to reach common ground on how to expand the EU’s bailout fund for debt-ridden countries.

German Chancellor Angela Merkel has called on legislators to support measures to boost the fund.

Anti-bank demonstrators have gathered outside the Bundestag, unfurling a 15 metre-long banner calling for “die Banken in die Schranken” or “Cut the Banks down to Size“, with just a hint of “Stick the Bankers Behind Bars“.

Following are the reactions to today’s round of discussions:

BBC business editor Robert Peston:

“The EU is left with using complicated financial engineering that may only boost the EFSF (European Financial Stability Facility) capacity to about 1tn euros. The markets may be disappointed in this move, which may only buy a year or so – not enough time for fundamental reform of Europe’s debt-ridden economies. There was also disagreement over the extent of losses that should be imposed on Greece’s lenders, with Germany seeking a 50 per cent-60 per cent haircut.”

Channel 4, economics editor, Faisal Islam charted out the “broad contours of the crisis”:

“1. Bubble wrap the eurozone banks in €100bn more capital.

2. Get the banks to agree a write off of between 40 and 60 per cent of debts (vs 20 per cent already agreed)

3. Equip the Eurozone bailout facility with €1 trillion or two of firepower to deal with possible spill over for Spain and especially Italy.”

Former British chancellor Norman Lamont told BBC Radio 4’s Today programme:

“There’s a very important aspect of this and that is something called credit default swaps – the insurance policies that are taken out to safeguard people, insure people, against default by sovereign authorities like Greece.

“One of the dangers of the haircut that is being proposed is that a severe haircut will cause a credit event and will trigger credit default swaps and will therefore affect banks who hold those credit default swaps.

“I personally think the long-term future of the euro will be argued about for some time to come because the strains there are so immense I don’t believe that the southern Mediterranean countries in the long run can ever really become fully competitive.”

M&G’s Stefan Isaacs commented on the eurozone mess – “time for inflation protection”:

“Travelling through Switzerland I can’t help but think that politicians both here and in the UK have a lot to thank their predecessors/electorates for. The relative safe-haven status enjoyed by both economies reflects, at least in part, the arm’s length relationship with the euro. (Swiss readers may not take kindly to being compared with us Brits, but you take my point.)

“The eurozone policy makers who are currently trying to thrash out some sort of ‘deal’ have an almost impossible task on their hands. Despite a belated recognition that some leadership is much required, the reality is that a comprehensive solution won’t be reached.

“We’ve talked before about the inherent dangers in any monetary union absent fiscal union. Are the French, Italians, the Spanish, even the Greeks ready to be governed by Berlin?”

Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“Two choices face the eurozone countries today – an orderly and painful widespread default or a chaotic and extremely painful bailout. They should opt to bring this crisis to an end.

“It is time Europe’s leaders finally learnt to stop spending money they don’t have and those who have lent money to highly-indebted governments must now face the consequences.

“Using taxpayers’ money to save bank bondholders has got to stop. Recapitalising banks using eurozone taxpayers’ money will simply lead more European governments to crisis point. A structured default will be painful but it is infinitely preferable to the risky gamble that looks likely to be made today.

 “The assumption that lending to governments is safe no longer applies.”

Manoj Ladwa, senior trader at ETX Capital, said:

“Traders remain jittery and volumes stunted as the market waits for Europe’s leaders to finally put a lid on the debt crisis. The recapitalization of European banks and a 50% haircut on Greek debt seems to be on the cards and could be just enough to ease investor concerns.

“But the market will also look for measures to ring-fence Italy and Spain from any contagion effect. If deemed inadequate, we could see a return to the volatility of three months ago.”

Louise Cooper, markets analyst at BGC Partners:

“We were promised a master plan two weeks ago and yet here we are, even after extra meetings, expecting to be disappointed. Its the Finance Ministers and their financial calculators that help give us the nitty gritty of any rescue plan and they are a no-show for today’s event.

“Meanwhile markets are adopting a “wait and see” approach, even though expectations are pretty low as to what will be achieved from today’s latest get together. Grand, bold statements yes, and lots of talk of “saving the eurozone” and “solidarity” but in reality, if you ignore the PR managed quotes, what will actually have been achieved?”




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