A deal has been reached. While many decisions are yet to be made the agreed upon deal looks something like this:
- A "voluntary" haircut of 50% on Greek debt
- Bank recapitalization set at 106 billion euros
- EFSF will use leverage to get to at least 1 trillion Euros
- Leverage will be via a combination SIV plus Insurance plan
- Banks get an additional 21 billion Euros in "official aid"
- The ECB is going to continue to buy Italian bonds come hell or high water
A group of 70 European banks will need to raise 106 billion euros in the next eight months.
- Greek banks need 30 billion euros
- Spanish banks need 26.2 billion euros
- French banks need 8.8 billion euros
- Italian banks need 14.8 billion euros
- Remaining countries 26.6
Banks that fail to raise enough capital on the markets will first tap national governments, falling back on the EFSF rescue fund only as a last resort.
The above details pieced together from EU Sets 50% Greek Writedown, $1.4T in Fund and Impasse on Greek Debt Relief Threatens EU Crisis Summit Deal
The fuzziest point in the deal is in regards to what banks get the additional 21 billion Euros in "official aid", with what strings, and where the money comes from.
Good News for Bears
Although many details are yet to be resolved, the bulls got everything they wanted except endless printing by the ECB. However, the sad fundamental situation remains unchanged