Greece headed on Friday towards the first default in the eurozone’s history after a summit meeting struck a grand bargain with banks to save the single currency from a debt crisis.
Rating agency Fitch signalled the deal will trigger a “restricted” default of Greece because private creditors will take a loss of 21% in their Greek holdings as part of the rescue package (see graphic).
Particpating banks, however, estimate that the total long-term cost to them will be much higher."Our ambition is to seize the Greek crisis to make a quantum leap in eurozone governance," French President Nicolas Sarkozy said at the close of the summit.
The eurozone, which hopes the default will last just a few days, took steps to protect two other bailed-out nations, Portugal and Ireland, by also extending to them longer loan repayment periods and lower rates.
Global markets greeted the deal with relief as European stocks rose further on Friday.
“Europe took a huge step forward,” Greek Prime Minister George Papandreou told his ministers.
AFP & Reuters