European leaders emerged from a 10-hour meeting in Brussels on Thursday with an agreement, finally, on how to prevent Greece from defaulting on its debt. The solution entailed a 50% write-down of Greek debt by banks, a boost in the euro zone’s rescue fund to $1.4 trillion and a substantial recapitalization of banks.
Banks were not happy with the arrangement and indeed were more dictated to than asked to comply, Bloomberg reported. AdvisorOne reported on Tuesday that banks were reluctant to accept such a large write-down, saying it would not be voluntary.
A statement issued by euro zone leaders around midnight was disputed by Charles Dallara, managing director of the Institute of International Finance (IIF), who said: “There is no agreement on any element of a deal.” However, Dallara was brought into the meeting, according to French President Nicolas Sarkozy, “not to negotiate, but to inform them on decisions taken by the 17 [European Union nations], and then they themselves went on to think and work on it.”
Euro zone leaders said that the write-down would be voluntary, although agreement was reached only after presentation of an offer banks could not refuse. “It was the fiercely delivered wish by Merkel, Sarkozy and 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,” which “would have cost states a lot of money and would have ruined the banks,” Bloomberg quoted Luxembourg Prime Minister Jean-Claude Juncker as saying.