Euro-Zone Bail-out: Media & Market Reactions

Greece has been bailed out. A number of steps have been initiated by the leaders in Europe. A modicum of stability has returned to the Euro-zone financial (and political) system.

Specific to Greece, euro-zone official lenders’ debts have been restructured in the forms of lowering interest rates from 5.5% to approx. 3.5% and extension of term from7.5 years to 15 or even 30 years. These have been backed by €109 billion bail-out money, an additional €20 billion for Greek bond buyback and €35 billion ECB collateral for Greek banks. Private creditors, officially recognized as Private-Sector Involvement (PSI) have been given a choice of either of three options – rollover of maturing bonds, swap with longer maturities (both backed by AAA  -rated collateral) or secondary market bond buybacks. However, the PSI has been defined to include only ‘voluntary’ and ‘substantial’ creditors, which would lead to a number of lenders being short-changed.

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