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World markets are surging right now on hopes that the EU has come up with something good and effective on the Greek bailout front.Athens stocks are up 2.8%.
Italy is up about the same.
The Dow is up 120.
That’s just one of the many proposals that are likely to be approved in order to keep the euro afloat.
Here’s what’s coming in a “draft of conclusions” that EU leaders will release after the meeting. Check out a copy leaked to the Telegraph >>:
– Even ECB President Jean-Claude Trichet has accepted that a new Greek bailout will likely trigger selective default for Greece.
– As expected, the bailout will strengthen the powers of the European Financial Stability Facility, which will now be able to recapitalize banks in countries on shaky financial foundations. That means both the countries that have and have not received formal bailouts. In more stable countries like Spain and Italy, that would probably happen under the guise of more flexible credit lines. ???
– The current proposal focuses on rolling over maturing debt into longer-term obligations.
– The EFSF will be allowed to charge rates as low as 3.5% on lending (down from 5.5%).
– No bank tax will likely be part of the new package.
– The ECB may accept Greek debt as collateral if the EFSF guarantees it. This really goes against its policy.
– The bailout will probably include a loan of up to €70 billion.
UPDATE: The Telegraph just released a draft of the new bailout.
Here are some notable new bits:
– EFSF loans to Greece won’t mature for at least 15 years (rather than the maximum 7.5).
– All the updates to the EFSF lending procedure for Greece will also apply to Ireland and Portugal. (That’s the 3.5% lending rate and that 15 year loan maturity.)
– The draft expands the power of the EFSF to provide money to nations not receiving a bailout, but doesn’t really say how it’s going to go about this.
– The statement “[reaffirms other EU countries’] inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms.” Essentially, selective default is only for Greece. Sorry, Ireland.
– It talks a lot about increasing growth.
– It also believes austerity measures are going to work.