Greek Sustainability Needs More Investor Losses, Troika Says

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Bondholders will need to take deeper losses on Greek holdings to make the country’s debt sustainable, according to a report on the country’s finances by international creditors.

The financial situation in Greece “has taken a turn for the worse” since the last review in June, said the report of the so-called troika dated today. The previous assessment led to a July agreement that called for investors to take a 21 percent reduction in their holdings’ net present value.

Trichet: EU model needs strengthening

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The president of the European Central Bank has urged Eurozone governments to tighten fiscal discipline and, if necessary, commit funds to protect the monetary union.

As reports swirled of the ECB bulk buying Irish and Portuguese bonds, Jean-Claude Trichet said on Friday that euro member states must take a "quantum leap" in order to strengthen economic governance.

"The tensions associated with the Irish fiscal problems and the reorganisation of its banking sector have led to renewed bouts of high volatility in financial market," Trichet told the European American Press Club in Paris.

"More than ever it is important that governments step up consolidation in way that is credible and lays the foundation for sustainable long-term growth."

The president called for a new system of mutual surveillance of government fiscal policies as a means of preventing "excessive" budget deficits.

He suggested that poorly performing governments should face sanctions and targets for the reduction of public debt towards a 60 per cent ceiling.

"Europe's leaders should recognise that our economic model is in need of a considerable strengthening, especially our system of economic governance," he said.

Europe Moving to Restore Growth and Sustainability

A new European Stabilization Mechanism, announced May 9, is helping underpin confidence in Europe after a period of financial market stress, triggered by concerns over government solvency in several countries.

The European Union and the European Central Bank (ECB) have adopted a comprehensive package of measures to stabilize financial markets and support the adjustment of European economies. The European Union has also committed to accelerating structural reforms, strengthen fiscal discipline, and establish a permanent crisis resolution framework.