A lot of revolutionary ideas have come out of Europe over the past two centuries. But would you imagine requiring that any contributions by private banks to the Greece bailout be strictly voluntary would be one of them? The Guardian reports:
After a meeting with the French president, Nicolas Sarkozy, in Berlin on Thursday, the German chancellor said they had agreed that any contribution from private creditors to the package would have to be voluntary.
“We want the participation of private creditors on a voluntary basis,” said Merkel, stressing that there was no legal way in which banks could be forced to play along.
Sarkozy welcomed Germany’s change of position, describing it as “a breakthrough”.
Granted, the French president might be much happier to shield private banks from forced contributions than his German counterpart in part due to BNP Paribas, one of France’s largest banks, having invested a sizable sum into the Greek economy. However, I overall see this as a positive move by the European community, and I am not in the least surprised that financial markets reacted well to the decision:
In London the FTSE 100 index erased early losses, and the eurostrengthened against other major currencies. Greek government bonds also staged a small recovery. The yield, or interest rate, on the two-year Greek bond dropped to 28.6%, from over 30% early on Friday.
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