Greek debt crisis: big hurdle crossed

The bond-holders represented the last obstacle to the second bail-out of Greece's debt-shattered economy. They had to agree by 8 p.m. Athens time.  80 percent have, enough for the Greek bail-out to go forward.

From the moment the crisis went from smoldering to explosive, last summer this deal has been haggled over, delayed, brought the single currency to the brink of extinction and threatened to take the world economy through a worm hole into a new dimension – a very dark one.

A three-way deal between Greece, its EU partners and the private bond-holders often seemed as if it might be impossible to reach. This last piece of the puzzle was open to question even after Greece and the EU had reached agreement on their part.

The Greek government had agreed to effectively submerge its economy in depression – unemployment is now 21 percent and rising like a flood tide – while it tries to re-organize the way it functions. The EU would provide up to 130 billion euros ($172.5 billion) to Greece to allow it to pay off its creditors and help reduce its debt to 120 percent of GDP.

What was needed was for the creditors to agree to accept new bonds worth less than 50 cents on the euro for the value of their holdings. Good explanation here.

Earlier this week there was speculation among eurosceptics that not enough of the private bond-holders would do that.  A minimum of two-thirds of those private bond-holders – mostly banks and pension funds – was needed. But as so often has happened in this crisis, the skeptics were wrong.

This is far from the end of the saga, of course. Nouriel Roubini writing in the FT says no one should shed tears for the bond holders, "The reality is that private creditors got a very sweet deal" The reason why?

"Official creditors will be left to suffer most of the huge additional losses that remain likely on Greece’s still unsustainable debt in future. Moreover, the second official sector rescue of Greece will not be the last. Greece will not regain market access for at least another decade; so its fiscal and current account deficits will have to be financed with additional official resources for the foreseeable future."

A state that is a ward of the States, in other words.

In any case, European stock markets ignored the long term questions that hover over Greece and closed well up on the day: London's FTSE 100 was up 1.2percent, Paris's CAC – 2.5percent, Frankfurt's DAX was also up, 2.5percent.

Sign up for our daily newsletter

Sign up for The Top of the World, delivered to your inbox every weekday morning.