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21:06 26/10/2011 - Πηγή: Olympia

The bond holder

Impasse on Greek Debt Relief Threatens Deal

European Union talks with banks on bondholder losses as part of a second Greek bailout were deadlocked, an EU official said, dimming the chances for a comprehensive crisis-fighting strategy at tonight’s summit.

German Chancellor Angela

Merkel doused expectations of a breakthrough, saying on the way into the meeting at EU headquarters in Brussels that “work’s not been done yet, but everyone’s coming here today with the goal to progress quite a bit.”

The Greek deadlock darkens the summit’s prospects, since deals on recapitalizing banks and bolstering the 440 billion- euro ($608 billion) rescue fund hinge on steering debt-laden Greece back toward financial health.

While policy makers and bondholders were converging on a 50 percent writedown of Greek debt, clashes over the structure of the transaction will limit the summit to issuing a mandate for further talks, the official said in Brussels today on condition of anonymity.

European leaders convened for the second summit in four days — and the 14th in 21 months — amid mounting global exasperation over their failure to extinguish the two-year-old crisis that now threatens to ravage Italy and France and brake the world economy.

“It’s the details that are being awaited and I’m skeptical about those being finalized today,” said Prime Minister Donald Tusk of Poland, one of 10 leaders of non-euro countries who will take part in the summit’s first session.

Euro Weakens

The euro slumped on concern that what was billed as a decisive meeting will fall short. The currency weakened 0.4 percent to $1.3855 at 5:45 p.m.

Dramas played out across Europe during the day, with Merkel winning a German parliament mandate to negotiate on the rescue fund, Italian Prime Minister Silvio Berlusconi hustling to prepare new budget cuts and EU representatives jousting with banks over the costs of reviving Greece.

“There is a fatigue on financial markets listening to politicians always coming up with the ultimate, final plan,” Carsten Brzeski, an economist at ING Group in Brussels, said in an interview with Francine Lacqua on Bloomberg Television.

Euro leaders won’t rule out a forced Greek writedown, while continuing to pursue a “voluntary” solution that would scale up a July accord that foresaw 21 percent losses for bondholders, the EU official said.

Bank Lobbying

The Institute of International Finance, which lobbies on behalf of 450 financial firms, sweetened its offer yesterday, proposing to go beyond the 40 percent losses it mooted last week, said two people with knowledge of the talks.

The outlines of a deal to safeguard banks emerged, centering on a June 30, 2012 deadline for lenders to reach core capital reserves of 9 percent after writing down their sovereign debt holdings, according to a draft summit statement.

Banks below that target would face “constraints” on p