Sarkozy and Merkel pledge deal this month
German Chancellor Angela Merkel and French President Nicolas Sarkozy said on Sunday that they would provide a ?comprehensive? response to the eurozone crisis by the end of the month.
This could include a bigger haircut for holders of Greek bonds, which the head of one of the world?s leading funds told Sunday?s Kathimerini would be absolutely necessary to make the country?s debt manageable.
?We are very conscious that France and Germany have a particular responsibility for stabilizing the euro,? Sarkozy said at a joint news conference with Merkel in Berlin.
?We need to deliver a response that is sustainable and comprehensive. We have decided to provide this response by the end of the month because Europe must solve its problems by the G20 summit in Cannes,? he added, saying it was too early to enter into details.
The two leaders did not comment on speculation that a revised strategy would involve holders of Greek debt being asked to accept a 50 percent haircut rather than the 21 percent reduction proposed in the July 21 agreement between Athens and its eurozone partners.
The co-chief investment officer of Pimco, the world?s largest bond fund, Mohamed El-Erian, said that Greece?s debt would not be serviceable unless it is reduced.
?Greece must seek a much bigger ?haircut? than 21 percent,? El-Erian said. ?The July 21 deal is a start, but it falls well short of what Greece requires to sustain its excessive debt burden and create conditions which will bring it back on a course of viable growth.?
The fund chief warned that a bigger haircut could lead to a ?credit event? that would cause problems for Greece in the short term but which would be a ?trade-off for longer-term benefits.?
