Banks Bow to ‘Last Word’ From Merkel, Sarkozy on Greek Debt - BusinessWeek
The world’s biggest banks bowed to what German Chancellor Angela Merkel called the “last word,” agreeing to write down their Greek government debt by half in the pivotal piece of the euro area’s bid to stem the financial crisis.
The Institute of International Finance, which represents financial companies, agreed to “develop a concrete voluntary agreement on the firm basis of a nominal discount of 50 percent on notional Greek debt held by private investors,” Managing Director Charles Dallara said in a statement e-mailed at 4:26 a.m. in Brussels.
Euro-area leaders who called Dallara into a meeting at about midnight, forcing a break in their 10-hour summit, said that while the bond transaction will be voluntary, the decision resulted from an offer he couldn’t refuse.
“It was the fiercely delivered wish by Merkel, Sarkozy, Juncker, that if a voluntary agreement with the banks was not possible, we wouldn’t resist one second to move toward a scenario of the total insolvency of Greece,” Luxembourg Prime Minister Jean-Claude Juncker told reporters. That “would have cost states a lot of money and would have ruined the banks.”