In the end, it was Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France against the European banking establishment — and the bankers blinked.
They knew how badly the European leaders needed a deal, and how much financial experts feared a disorderly, involuntary default. That could set off a “credit event,” throwing world financial markets into turmoil, much as the collapse of Lehman Brothers did in the fall of 2008.
But Mrs. Merkel called the bankers’ bluff, said officials present at the discussions. Accept the 50 percent write-down, she told the bankers, or bear the consequences of default. In effect, she was willing to risk a credit event, and to place the blame for any fallout on them.
Note EU-Digest: Lets hope the European leadership will continue to keep the pressure on the financial community and not the other way around.
For more: Calling Bankers’ Bluff, Merkel Won Europe a Debt Plan - NYTimes.com
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