Steve Chiotakis: It took much of the night, but there's a grand plan on the table to save the eurozone. Investors have agreed to take a 50 percent loss on Greek debt. European banks will also be required to raise more money to strengthen their balance sheets, and the eurozone's main bailout fund will increase its capacity to $1.4 trillion.
Richard DeKaser is deputy chief economist at the Parthenon Group, he's with us from Boston. Good morning Richard.
Richard Dekaser: Good morning.
Chiotakis: Now that this European deal is done, what does it mean for the United States?
Dekaser: Well, the good news is that the worst case scenario of a financial crisis has been averted. People had feared an uncontrolled default situation -- that now does not seem likely. Banks have agreed to a voluntary write-down of Greek debt, and that's going to be supported by a stability fund, which Europe has agreed to beef up.
Chiotakis: All right, so they're going to beef up this stability fund, and I know as part of this deal European banks are going to have to raise a lot of money. In this environment, this economy -- how big a challenge is that?
Dekaser: Well, it is a challenge. Banks are essentially being asked to increase their capitalization to accommodate these increased losses. There's two ways banks can do that: either they can earn their way through it or they can borrow their way through it.
It looks like we're going to opt for the second of those two, and that means they're going likely be more parsimonious with lending over the course of the next year.
They've got to reach these targets by June of next year, and to do that we're likely to see not a quite credit crunch, but stringent credit, which is not going to be conducive to growth in an economy that's already creeping along.
Chiotakis: Something we're used to here. All right, Richard DeKaser, joining us this morning from Boston, thanks.
Dekaser: My pleasure.