RESTRUCTURING

IN THE AFTERMATH OF THE WORST PUBLIC FINANCES CRISIS IN OUR LIFETIMES…

TO DAY, CO-ORDINATED INTERNATIONAL EFFORTS MAY HAVE HELPED TO PUT AN END TO THE WORST FINANCIAL CRISIS IN OUR LIFETIMES IN EUROPE…?

TODAY, EUROPEAN LEADERS IN A SIGNIFICANT STEP TOWARD RESOLVING THE EUROZONE DEBT AND BANKING CRISIS, WON AN AGREEMENT FROM TOP COMMERCIAL BANKS TO WRITE OFF 50% OF THEIR GREEK DEBT.

THE AGREEMENT ALSO INCLUDES :

  1. TO LEVERAGE  THE EXISTING BAILOUT FUND TO BOOST ITS FIRE POWER TO 1 TRILLION EUROS.
  2. TO RECAPITALIZE VULNERABLE BANKING INSTITUTIONS TO THE TUNE OF SOME 106 BILLION EUROS.

THE EUROPEAN BANKING AUTHORITY SAYS THAT GREEK BANKS WOULD NEED 30 BILLION EUROS, SPANISH BANKS 26.2 BILLION EUROS, ITALIAN BANKS 14,8 BILLION EUROS, FRENCH BANKS 8,8 BILLION EUROS, AND GERMAN BANKS 5.2 BILLION EUROS, WHILE BRITISH AND IRISH BANKS NEED NO CAPITAL.

THE DEAL INCLUDES CALLS FOR MORE CONTROL OVER SALARIES, BONUSES AND DIVIDENDS IN THE BANKING INDUSTRY UNTIL RECAPITALIZATION IS COMPLETE.

WHILE WE ARE ENTERING NOVEMBER 2011 ON A POSITIVE FOOTING WITH THIS STRATEGIC  AGREEMENT THAT REFLECTS THE OUTSTANDING  WORK OF THE G20, THE RECOVERY WILL BE FRAGILE AND WILL NEED TO BE STRENGHTENED TO RESTORE PUBLIC FINANCES WHICH ARE IN A DIRE POSITION IN MANY MEMBER COUNTRIES.

STRUCTURAL REFORMS ARE KEY TO ENHANCING THE PRODUCTIVE CAPACITY AND THE GOVERNANCE OF OUR ECONOMIES, NOT ONLY TO NURTURE  THE RECOVERY, BUT ALSO TO LAY THE FOUNDATIONS FOR A STRONGER AND FAIRER ECONOMY IN THE FUTURE.

STRUCTURAL REFORMS ARE ALSO JUST NECESSARY IN ORDER TO BOOST GROWTH AND CONSOLIDATE PUBLIC FINANCES, KEEPING IN MIND THAT IN 2011, GROSS GOVERNMENT DEBT IS EXPECTED TO EXCEED 100% OF GDP IN THE OECD AREA.

WHATEVER MIGHT HAPPENS TO THE EUROZONE TO MORROW, THIS MAJOR CRISIS REMAINS AN OPPORTUNTY TO QUESTION OURSELVES :

  • WHY COULDN’T WE AVOID THE CRISIS ?
  • WHAT NEEDS TO BE DONE TO PREVENT ANOTHER CRISIS ?

PHLDUCX