Did Europe get a Deal or was it an ILLUSION

Europe’s leaders did better than expected, but expectations were low to start. They announced a greatly strengthened financial rescue plan that includes bigger write-downs of Greek Debt and new injections of Capital into weakened European Banks. Still, far too many of the crucial details have been left to work out over the days, weeks and months ahead.

Until  those are known, it will not be clear if Europe has finally mobilized enough cash and political will to stop the unraveling that now also threatens Italy, Spain and even France. And Europe is still only grappling with the financial systems of the crisis, not the underlying causes.

One of the biggest of those is that while Europe has a unified currency, and independent Central Bank, it has no lender of last resort - like the Federal Reserve – that can supply unlimited emergency funds to Governments and banks that need them.

This week, the write-down plan has advanced to a different level altogether. Greece’s Non-Govt. Creditors – Banks and Private investors – were told to agree to “VOLUNTARY” swaps and rescheduling that would yield them roughly 50 cents of every dollar now owed to them. Markets value this debt at close to 40 cents on the dollar.

Writing down Greek debt will show how dangerously low on Capital major European Banks have become. Markets are understandably wary. None of these would be necessary if the  European Central bank was authorized to act as a lender of last resort. Without that, Europe’s crisis will continue and continue to threaten markets worldwide.

The news of such DEALS will only show momentary upsurge in Indian markets while the actual global recovery might take weeks, months and years………

So are we ready for the unexpected in the days to come ????????