Saturday, July 23, 2011

As Europe acts on debt crisis, U.S. dithers

By Tom Petruno Market Beat

urope's new bailout plan for its weakest economies finally recognizes the brutal reality of the developed world's financial woes: Many governments simply can't pay what they owe — or will reach that point soon.

The rescue plan announced Thursday by the European Union extends another $157 billion in loans to Greece to help it cover its debts, but also asks private Greek bondholders to take a haircut on their securities.

Imagine if you owned a U.S. Treasury note maturing in five years and the government asked you to turn it in for a lower-yielding security that would mature in 30 years.

That's the gist of what European leaders want Greek bondholders to do, to help the country dig out from nearly $500 billion in debt.

Ever since the extent of Greece's financial mess became evident in late 2009, many analysts have warned that the only sure way out was some level of debt forgiveness. In one of the formulas the EU has proposed for Greece's creditors, the equivalent of a $1,000 bond would become a new bond worth $800.

1 comment:

  1. eeeeeeeeeeeeek what happened to all the articles?


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