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EU's Greek debt deal shields Italy: IIF chief

The head of the world's banking lobby said on Thursday that the EU deal on Greek public debt would curb potential contagion in the eurozone, particularly to Italy.

business Updated: Oct 27, 2011 22:58 IST

The head of the world's banking lobby said on Thursday that the EU deal on Greek public debt would curb potential contagion in the eurozone, particularly to Italy.


Charles Dallara, managing director of the Institute of International Finance, said in a CNBC television interview that the agreement, reached early Thursday after marathon negotiations with EU leaders in Brussels, would go a long way to underpin confidence in the eurozone.

"It was important for all of us at the same time to shore up the credibility of all the other sovereign credits and that has been accomplished by the firewall arrangements," he said.

As part of the complex rescue package, the IIF agreed with EU leaders that private creditors would write down 50 percent of Greece's debt.

They also agreed to expand the firepower of the bloc's bailout fund, the European Financial Stability Facility, allowing it to provide risk insurance on debt issued by fragile economies such as Italy.

Dallara downplayed concerns that heavily indebted Italy, the single-currency bloc's third-largest economy, may find access to credit markets severely hampered

"I don't see that happening. Italy is now in the process of rebuilding its credibility and that was reinforced this week by the measures they are taking," he said.