Bob Moon: And today, we can look at Greece from a new angle. Up to now, we’ve explored the effect of that country’s sovereign debt crisis on its people, and on the rest of the world. And a lot of the stories have been somber. So it was nice to get some potentially good news on that front today.
EU leaders burned the midnight oil last night, and hashed out a solution to Europe’s sovereign debt crisis. They emerged this morning with a new deal they say could save the euro. It takes an ax to Greece’s debt burden, and pushes the banks to raise more money. But as Marketplace’s Stephen Beard reports from London, it still may not be enough.
Stephen Beard: It’s a complicated deal with three elements. First, Greece gets some relief. Banks are being asked to write off half what they lent the government in Athens. And, says Harry Samuel of the Royal Bank of Canada, it looks like the banks will comply.
Harry Samuel: Most, if not all, the banks have agreed as to the 50 percent write-down on their Greek debt holding. So actually that’s one part of the announcement this morning that, from the market’s perspective, was quite clear.
But the second part of the deal is a bit more doubtful. The banks will be required to raise about €100 billion in extra capital so they can absorb these losses without collapsing.
Louise Cooper of BGC Partners claims it’s not enough.
Louise Cooper: Well actually, double that needs to be put into European banks. It’s all done a little bit on the cheap. I want to see shock and awe — we haven’t got that.
And then there’s the agreement to more than double the size of the bailout fund to $1.4 trillion to protect Italy from defaulting. It’s not clear where the extra cash will come from. China and Brazil have been mooted.
Philip Booth of the Institute for Economic Affairs is not impressed.
Phillip Booth: It seems to me to be clutching at straws, really, to expect other governments to provide this capital, and if they do provide this capital — given the risks that are involved — it will come at a pretty big cost.
Others argue that today’s deal doesn’t really address the fundamental flaw in the euro which caused the crisis: the wide divergence in performance between the member states.
Sony Kapoor of the Re-Define think-tank.
Sony Kapoor: They have stopped the euro from collapsing today or even perhaps tomorrow. But they definitely haven’t saved the euro. We are still in the thick of trouble. We’re not out of the woods.
Stock markets around the world greeted the euro debt deal with near euphoria today. But we have seen such enthusiasm before — after earlier bailouts — and it soon faded.
In London, I’m Stephen Beard for Marketplace.
Moon: So what’s on the minds of Greek-Americans as they look across the ocean and ponder the austerity measures being imposed on their native land? We decided to check, at the local L.A. spot for Mousaka and Baklava — Papa Cristo’s.
Chrys Chrys: My name is Chrys Chrys. I’m the proud owner of C & K Importing and Papa Cristo’s. Our business is Greek products and we have to purchase euros. So if the euro goes up, my products are obviously higher because I have to spend more dollars to buy euros.
Lambros Houvardas: A lot of the Greeks in Greece, they have been spoiled. You know, pension for this. Pension for that.
Dimitra Koutsos: People are leaving. I know people, families are leaving to go to Cyprus. As far as my family is concerned, that’s what they are planning on doing because some of them have really been affected already. And still all the cuts haven’t even taken place yet.
That was Chrys Chrys, Lambros Houvardas and Dimitra Koutsos. We found them at Papa Cristo’s, a Greek restaurant in Los Angeles.
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