Saturday

21st Apr 2018

Eurozone chiefs reach deal with bank bosses on Greek haircut

  • The world's banks eventually agreed to accept a haircut of 50 percent on their Greek holdings (Photo: andres rueda)

Eurozone leaders have reached a deal with the world’s major banks under which they will accept a haircut of 50 percent on their holdings of Greek sovereign debt.

Early Thursday (27 October) morning, EU Presidents Herman van Rompuy and Jose Manuel Barroso announced that an agreement had finally been hammered out with the Institute for International Finance, the association representing the sector, after hours of stonewalling by the banks, who had refused to accept a write-down of Greek bonds exceeding 40 percent.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

“It was agreed tonight there will be a nominal discount of 50 percent of notional Greek debt,” a weary Van Rompuy told reporters just after 4am in the European capital.

Earlier in the night, the managing director of the IIF, Charles Dallara, who led negotiations with EU premiers and presidents over the issue, had put out a statement saying bluntly: “There is no agreement on any element of a deal."

European leaders had been pushing for the banks to accept losses of 60 percent.

The International Monetary Fund for its part is understood to have favoured a haircut of 75 percent, arguing that a more substantial write-down was the only way to ensure that Greece’s debt can be held at a sustainable level.

Without such a reduction in its debt pile, the Washington-based lender feared that Athens will not indefinitely have to be attached to a drip-feed of bail-outs to keep its economy alive.

German Chancellor Angela Merkel, French President Nicolas Sarkozy, IMF boss Christine Lagarde and EU Council President Herman van Rompuy met privately with Dallara through the night in a desperate attempt to convince the banking chief to break his stonewalling.

And ultimately, according to German Chancellor Angela Merkel, the EU leaders prevailed in pushing up the contribution of the banks.

“We actually at our level only made one offer. The representatives of the banks took it back to other banks,” she told reporters. “This was our last offer. In the end we got their approval."

Asked whether the EU leaders ever threatened the banks with an imposed haircut, which would have entailed a hard Greek default, she replied: “Since an offer was made, we never hit that point, but clear a voluntary contribution was preferred so we didn't need to think about the other option.”

Van Rompuy also announced that eurozone leaders had agreed a plan to leverage the area’s rescue fund, the European Financial Stability Facility (EFSF), to build a “firewall” of some €1 trillion, although technical details of the plan will not be decided for perhaps another month.

The EFSF will now insure against first losses on the issuance of fresh sovereign debt at a level of somewhere between 20 and 30 percent while at the same time establish a number of ‘special purpose investment vehicles’, or Spivs, which hopes to attract investment from sovereign wealth funds in China and other emerging economies, and will also involve additional participation of the International Monetary Fund.

Both aspects of the reinforcement of the EFSF will “multiply up to five-fold the firepower of the EFSF,” he said, “depending on market conditions, the set-up and investors’ responsiveness in view of economic policies.”

Banks stonewall EU leaders on haircut

Negotiations between EU leaders and representatives of the global banking industry over the scale of losses the financial institutions are willing to take on Greek debt have all but broken down.

EU agrees to fresh bank bail-outs

The EU's 27 member states have finally agreed to a recapitalisation of the region’s banks. Eastern powers have at the same time managed to win a commitment that they will be protected against capital outflows as a result.

Banks, Europe haggle over scale of bond haircut

The world’s banks have delivered a “significant” new offer on the scale of a haircut on their holdings of Greek sovereign debt, but no details have appeared since their earlier stance described by one EU diplomat as “playing hardball”.

Commission to unveil bank bail-out plan

European Commission President Jose Manuel Barroso has said that the EU executive will put forward plans for a fresh round of bank bail-outs across Europe on Wednesday.

First doubts emerge over eurozone deal

Markets sky-rocketed on Thursday in reaction to the eurozone deal sealed by EU leaders earlier that morning, but economists are starting to question the fine print, which the Polish Prime Minister presciently dubbed as "hell" hidden in the details.

News in Brief

  1. Audit office: Brexit 'divorce' bill could be billions higher
  2. MEPs urge better protection for journalists
  3. Dieselgate: MEPs back greater role for EU in car approvals
  4. European parliament adopts new organic farming rules
  5. EU granted protection to half million people in 2017
  6. Report: Facebook to carve 1.5bn users out of EU privacy law
  7. Greek court ruling permits migrants to travel to mainland
  8. Commonwealth summit hopes for trade boost after Brexit

Stakeholders' Highlights

  1. Nordic Council of MinistersWorld's Energy Ministers to Meet in Oresund in May to Discuss Green Energy
  2. ILGA EuropeParabéns! Portugal Votes to Respect the Rights of Trans and Intersex People
  3. Mission of China to the EUJobs, Energy, Steel: Government Work Report Sets China's Targets
  4. Martens CentreJoin Us at NET@WORK2018 Featuring Debates on Migration, Foreign Policy, Populism & Disinformation
  5. European Jewish CongressKantor Center Annual Report on Antisemitism Worldwide - The Year the Mask Came Off
  6. UNICEFCalls for the Protection of Children in the Gaza Strip
  7. Mission of China to the EUForeign Minister Wang Yi Highlights Importance of China-EU Relations
  8. Nordic Council of MinistersImmigration and Integration in the Nordic Region - Getting the Facts Straight
  9. Macedonian Human Rights MovementMacedonians in Bulgaria Demand to End the Anti-Macedonian Name Negotiations
  10. Counter BalanceThe EIB Needs to Lead by Example on Tax Justice
  11. ILGA EuropeTrans People in Sweden to be Paid Compensation for Forced Sterilisation
  12. International Partnership for Human RightsThe Danger of Standing Up for Justice and Rights in Central Asia

Latest News

  1. ECJ ruling set to end 10-year 'mouth tobacco' lobbying saga
  2. Whistleblowers, Syria and digital revolution This WEEK
  3. MEP friendship groups offer 'backdoor' for pariah regimes
  4. Macron and Merkel pledge euro reform
  5. Obscurity surrounds EU military fund's expert groups
  6. New EU party finance rules short circuit accountability
  7. Draghi to stay in secretive 'lobby' group
  8. Bulgaria offers lesson in tackling radical-right populists