Calling Bankers’ Bluff, Merkel Won Europe a Debt Plan

Posted by Kendall Harmon

...the real drama Thursday was in the meeting with the bankers, held in the offices of Herman Van Rompuy, the president of the European Council, in the huge modern building here where the summit meeting was being held. Besides Mr. Van Rompuy, Mrs. Merkel and Mr. Sarkozy, others present were Christine Lagarde, the former French finance minister who runs the International Monetary Fund; José Manuel Barroso, president of the European Commission; and Jean-Claude Juncker, chairman of the euro zone finance ministers.

While they gave in, the bankers, represented by Charles Dallara, managing director of the Institute of International Finance, praised the deal. Later on Thursday, he explained to reporters that the bankers, too, were frightened of setting off a credit event, activating credit default swaps and other complex financial instruments, with unclear but potentially dire consequences for the global financial system.

“We attached a great deal of significance to this being voluntary,” Mr. Dallara said. “We knew what it would take in our mind in terms of the basic elements to be voluntary. It was not at all times clear through the negotiations that all parties placed the same priority on this being voluntary,” he said, an indirect reference to the German chancellor.

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Filed under: * Economics, PoliticsEconomyConsumer/consumer spendingCorporations/Corporate LifeCredit MarketsCurrency MarketsEuroEuropean Central BankThe Banking System/SectorThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--Foreign RelationsPolitics in General* International News & CommentaryEurope--European Sovereign Debt Crisis of 2010FranceGermanyGreece

Posted October 28, 2011 at 7:31 am [Printer Friendly] [Print w/ comments]
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