Michael Schroeder from the highly regarded ZEW economic institute, and Clemens Fuest, a senior adviser to the German finance ministry say that the recent agreement on cutting Greek debt by 21% falls short.
Fuest said that another haircut is unavoidable in order to get Greece back on track. Clemens was more specific:
Writing in Proto Thema and quoted by Reuters, Clemens stated: “The July 21 deal will have to be strengthened by a further haircut of at least 50 percentâ€.
The massive bond buying of Italian and Spanish bonds helped stop the contagion to these countries. But Greece still has an impact, especially on France.
Outside of Greece, the banks that have the highest exposure to the Hellenic Republic are in France. French bank stocks plunged in the past week.
There were various rumors about a credit rating downgrade for France. These were denied. Also a rumor that Societe Generale is bankrupt were denied. The extreme volatility triggered regulators across Europe to ban short selling for two weeks.
Banning short cannot stop influential experts from talking, and cannot solve the sovereign debt crisis or the banking problems in Europe.
Further reading: Spain’s Defense Ministry Cannot Pay 26 Billion Euros of Debt
