Making small steps toward a European debt solution
A giant symbol of the European Union's currency, the euro, stands outside the headquarters of the European Central Bank in the central German city of Frankfurt am Main.
Steve Chiotakis: Over the weekend, leaders in Europe struggled to make progress on a plan that would bolster banks and offer bailout protection for Greece and other countries. And now a Wednesday deadline fast approaches for some sort of definitive plan.
Marketplace's Stephen Beard is with us live from London with the latest. Hi Stephen.
Stephen Beard: Hello Steve.
Chiotakis: I know this weekend's summit was supposed to be a big deal -- have eurozone leaders agreed to anything?
Beard: Yes, they did agree that Europe's banks need more capital, so if any of the European governments -- like Greece -- do default, or do restructure their debt, it won't trigger a European banking collapse. The figure that we're hearing -- that's the amount of money that will have to be pumped into the European banks -- around $150 billion.
Chiotakis: So, Stephen where is that money going to come from?
Beard: From the banks themselves. If they haven't got it, they'll turn to their national governments. Only if the governments can't pump in the money will the banks be able to turn to the European rescue fund -- which is also going to play a crucial role bailing out European governments so they don't default in the first place.
No agreement yet on how this fund is going to be beefed up, but markets seem to believe agreement will be reached by Wednesday. However, Bob McGee of Independent Research Strategy thinks the markets are getting ahead of themselves; investors could be disappointed.
Bob McGee: What I'm concerned about is that once they start picking through the details, they might feel that this really doesn't match up to the issues, and we're back where we were before. So the optimism that we see in markets at the moment may not last.
And another big worry for markets: investors who bought Greek government bonds are apparently goign to be asked to take a 60 cents on the dollar loss. It's going to be bloody.
Chiotakis: All right, Marketplace's Stephen Beard
in London for us. Stephen, thank you.
Beard: OK, Steve.