Good morning. There has been no new development in the last 24 hours from the eurozone. Talks of increasing the lending limit of the EFSF bailout fund to insure future sovereign debt defaults came to a naught as German Finance Minister Schaeuble emphasised that no such plan is currently on the table. Meanwhile, a London based think-tank, Open Europe, shot down the idea of increasing the firepower of EFSF to \u20ac2 trillion, warning that it would create even worse crisis. Instead, it argued, European banks should be \u2018fundamentally recapitalised\u2019 that would come with a far lower price tag of \u20ac372 billion. Ahead of the G20 meeting on Sunday, it advised a radical restructuring of Greek, Irish and Portuguese debt. <\/p>\n
\u201cThe recently mooted plan to use the EFSF to insure eurozone sovereign debt looks to be misguided. Using a fund backed by eurozone countries to insure against a default of some of the very same economies creates a circular problem. It was financial instruments with huge leverage and unfunded liabilities that largely created this financial mess in the first place. Replicating such a structure at the heart of the eurozone could potentially create an even worse crisis down the road,\u201d said Raoul Ruparel, director of research at Open Europe. It suggests that the second bailout to Greece be scrapped and the country should be allowed to default on 60 per cent of its debt. Similarly, Portugal should offer a 25 per cent write down on its debts to private investors.<\/p>\n
While Open Europe\u2019s suggestion has its merits, mainly it will save lot of tax-payer\u2019s money on a seemingly hopeless Greek debt situation, apart from restoring some faith on the European banking system \u2013 the ECB in particular, there are some roadblocks. Among the private investors, apart from the banks on both sides of Atlantic, many investment and pension funds continue to hold Greek debts. A 60 per cent default may create havoc for the retirement industry, ripping people of their old-age savings and forcing them to stay on work far longer.<\/p>\n
GBP\/EURO \u2013 1.1456
\nGBP\/US$ \u2013 1.5708
\nGBP\/CHF \u2013 1.4238
\nGBP\/CAN$ – 1.6061
\nGBP\/AUS$ \u2013 1.5435
\nGBP\/ZAR \u2013 12.6838
\nGBP\/JPY \u2013 120.65
\nGBP\/HKD \u2013 12.2328
\nGBP\/NZD \u2013 1.9821
\nGBP\/SEK \u2013 10.4530<\/p>\n