European Union talks with banks on bondholder losses as part of a second Greek bailout ran aground, dimming the chances for a comprehensive strategy at a summit to stamp out the debt crisis.Mandate for Further Talks
A statement issued close to midnight in Brussels by the Institute of International Finance, the bank lobby, said there was no agreement “on any element of a deal.”
The outlines of a deal to safeguard banks emerged, centering on a June 30, 2012 deadline for lenders to reach core capital reserves of 9 percent after writing down their sovereign debt holdings, according to a statement after all 27 EU leaders met.
A group of 70 European banks will need to raise 106 billion euros in the next eight months to meet the goal, the European Banking Authority, the banking regulator, said. Greek banks need 30 billion euros; those in Spain need 26.2 billion euros. In France, the need totals 8.8 billion euros and in Italy, it’s 14.8 billion euros.
While policy makers and bondholders were converging on a 50 percent writedown of Greek debt, clashes over collateral to underpin the transaction will limit the summit to issuing a mandate for further talks, an EU official said in Brussels on condition of anonymity.
While markets clamor for a signal that the euro area will devote 1 trillion euros or more to combating the crisis, the EU won’t be able to produce a number until late November, the EU official said.
The only agreement on anything is a mandate for further talks. This is the second summit in four days, and 14th summit in 21 months.
We can hope they talk themselves to death, but at this point that hope seems futile.
Mike "Mish" Shedlock
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