EU Reached An Agreement on Debt Crisis – Will It Work?

After ten hours of deliberations the EU leaders have managed to reach an agreement regarding the main issues of the European debt crisis.

The EU leaders agreed to make a 50% haircut on the Greek debt; they have also agreed to boost the EFSF (the European rescue fund) from 440 billion euros to 1 trillion euros. This boost should reduce the pressure in the financial community and ease the concerns revolving the European debt crisis.

The measures will also include recapitalization of European banks and the IMF stepping up and having a bigger role in dealing with the European debt crisis. The IMF said it is ready to deploy its next installment of 2.2 billion euro to Greece’s original bailout.

It will remain to be seen if these measures will be enough to ward off the advancement of the European debt crisis. Some argue that the current plan lacks resolution regarding the growth of EU countries to exist the current slump the EU countries have been in recent years. Time will tell if the 50% haircut on the Greek debt will be enough. ECB President, Trichet voiced his concern of a spillover effect of these haircuts on the European banking system.

BOJ Augmented Monetary Easing  

Bank of Japan announced yesterday it will boost its Monetary Easing by increasing the size of the asset purchasing plan by 5 trillion yen ($66 billion) from 50 trillion yen to 55 trillion yen.

This decision was made in order to deal with the ongoing European debt crisis and the concerns of the BOJ of the ramifications of the EU debt crisis on Japan’s economy.

Following this news, the Asia stock markets are traded up and the major commodities are traded with mixed trend while the Euro to US dollar is traded sharply up:

Euros to USD exchange rate is currently traded down at 1.4028 a 0.8735% increase as of 08:05*.

Nymex (WTI) crude oil price, short term futures (November 2011 delivery) is traded up by 2.32%, at $92.29 per barrel as of 07:59*.

Gold price, short term futures (November 2011 delivery) is traded at $1,722.10 per t oz. a $1.4 decrease or 0.08%, as of 07:58*.

(* GMT)

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2 comments for “EU Reached An Agreement on Debt Crisis – Will It Work?

  1. peter
    October 30, 2011 at 10:17 pm

    This agreement doesn’t solve the crisis at all. It is only a question of time and a lot of problems may arise when one of the bigger countries like Italy or Portugal defaults. The economic situation in those countries is not positive at all and the possible default would surely destroy all hopes placed in the EFSF and other rescue packages recently approved by the EU. This only shows that the countries which were in favor of looking for other solutions and refused to make their contributions were right. Now it’s too late and there clearly are no more good options that would put a halt to this crisis.

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