BRUSSELS - October 22, 2011
Finance ministers from the 17 nations that use the euro decided
Friday that banks must take larger writedowns on their Greek bonds
if Athens is ever to dig out from under its debts. A new report
said Greece's debt load may need to be slashed up to 60 percent -
as opposed to the 21 percent tentatively agreed to in July.
A negotiator from the eurozone has been asked to reopen
discussions with banks.
The next step now is to shore up the banks ahead of those
losses.
The European official said that EU leaders are expected to sign
off Sunday on forcing the continent's biggest banks to raise euro100
billion ($140 billion) in capital.
The official spoke on condition of anonymity because the
discussions were still ongoing.
While higher than recent press reports have suggested, the
recapitalization figure is likely to disappoint some analysts. A
report by the International Monetary Fund has called for up to euro200
billion ($280 billion) to be poured into banks.
The new rules would force systemically important banks to raise
their core capital ratios to 9 percent, compared with just 5
percent to 6 percent they needed to pass EU stress tests this
summer. The ratio measures the amount of capital that banks hold
compared to their risky assets.
Strengthening banks and slashing Greece's debts are both
critical to solving Europe's sovereign debt crisis, which is now
threatening to engulf larger economies like Italy and Spain and is
blamed for dampening growth across Europe and even the world.
"The crisis in the eurozone is doing real damage to many of the
European economies, including Britain," George Osborne, Britain's
chancellor of the exchequer, said as he headed into Saturday's
meeting. "We have had enough of short-term measures, sticking
plasters that get us through the next few weeks."
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Elena Becatoros and Sarah DiLorenzo contributed to this report
from Brussels.
