22.07.2011
BETTER THAN EXPECTED – BUT REDUCTION IN NET PRESENT VALUE OF GREEK DEBT IS ONLY 21%
Markets are always jubilant after a European summit because they focus on the headlines, not the substance. The overnight market reaction was quite extreme. Italian 10-year spreads were down to 2.5bp, and Spanish spreads down to 2.896% this morning. This tells us that the summit managed to move the eurozone away from the edge of a cliff back towards a situation where the crisis was 10 days ago.
Here is the statement by eurozone leaders. As ever, it is best to read the original document.
The three most important decisions taken by the summit were a net present value reduction in Greek debt/GDP by about 21%, a private sector participation that will trigger a temporary selective default rating, and more flexibility for the EFSF and the ESM.
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