Business, Finance & Economics

Greek bondholder haircuts. Europe: daily economic round-up.

Positive vibes were emanating from negotiations between the Greek government and its creditors over the size of the haircut bondholders will take as the week came to an end.

The Wall Street Journal reported that the haircut would be between 65 and 70 percent of the value of the bond. The talks will probably extend through the weekend.

The rumors of progress shaped today's bond trading. Safe haven bonds like U.S. treasury's and German bunds saw their yields go up as traders decided that it was worth buying other euro zone bonds. Italy's ten year rate is down to 6.3 percent after being in the danger zone, around 7 percent, for much of the last few months.

Europe's main stock markets were fractionally lower. FTSE 100 -0.2pc, CAC -0.1pc, DAX -0.1pc.

It's a week since Standard & Poor's downgraded the credit ratings of six euro zone countries including France, and these five days have been among the calmest since the euro zone debt crisis boiled over last summer. Still, it's Europe, there are storm clouds out there: Portugal looks increasingly likely to need serious attention.

But even Mohamed El-Erian CEO of PIMCO, the world's largest bond dealers, has shifted into a more constructive vein. "It is not too late" to deal with the global financial crisis, he writes in a syndicated article today.

He offers six bullet pointed ideas for unclogging the plumbing through which credit flows into the world economy. They are hardly radical. Here's one "In several Western countries, public-private partnerships should be formed to finance urgently needed infrastructure investment."

Here's another: "Governments should inform their electorates explicitly and comprehensively that a few contracts written during the inadvisable “great age” of leverage, debt, and credit entitlements cannot be met, and must be rewritten in a transparent way that strikes a balance between generations, labor and capital, and recipients and taxpayers."