I admit it: I've grown cynical about EU deals. They make a deal, the market rejoices, and then everyone notices that they still aren't an optimal currency union, and they haven't done many of the things that would help ease those tensions, like deepening fiscal integration. Nor have they credibly guaranteed all of each other's debt. At which point spreads begin to rise again on the debt of the shaky countries, and there we are again, watching Europe go through the motions of making yet another deal.
- Banks take a voluntary haircut on their Greek debt of 50%, in exchange for some unspecified "sweeteners". This is maybe better than what they'd get if the Greeks just defaulted, but--critically from the point of view of regulators--seems to avoid a "Credit event" that would trigger Greek CDS. This is supposed to help keep borrowing costs low, though the benefits are hotly contested.
- The €440 billion stabilization fund gets much bigger, apparently well north of €1 trillion. This adds considerable credibility to the guarantees, though it doesn't necessarily solve the problem that a lot of analysts have been worried about: every time another country runs into trouble, the pool of guarantors gets smaller, and the liabilities go up.
- The shakiest banks get a capital boost with, in total, about €100 billion going into their capital buffers. It's not clear, however, where this money is coming from
- Greece has to give a little bit back--they have to put €15 billion into the stabilization fund. Though the FT is skeptical: "Under the terms of the deal, Greece agreed to put €15bn it aims to raise from a vast privatisation programme back into the European Financial Stability Facility, the eurozone's €440bn rescue fund. International monitors have already acknowledged that Greece will struggle to raise the €50bn in privatisation cash it promised earlier this year, but the €15bn is supposed to come on top of previous commitments."
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