Friday, January 21, 2011

EU eyes bond buy-back for periphery

Financial Times
January 20, 2011

European leaders are considering a plan to allow the eurozone’s €440bn bail-out fund to lend money to struggling “peripheral” countries so they could buy back their own distressed bonds.

The strategy would effectively allow countries like Greece to restructure their debt on the open market.

The proposal is one of several being considered as part of wide-ranging deliberations on overhauling the fund, the European financial stabilisation facility, and officials cautioned no agreement on whether it would be included was likely for weeks.

If enacted, however, it would help mitigate one of the eurozone’s most vexing problems: how to lower the debt burden of countries such as Greece and Ireland, which many analysts believe will never be paid off without defaulting in spite of European Union-backed bail-outs.


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