Euro-zone Update (3): Greece loan extension, the creation of the European Systemic Risk Board

Since May commentators have been seriously concerned about the solvency of Greece in 2013/14 once the Euro-zone loan runs out.

This led to the inevitable question as to what the use of that facility is, if all it does is to post-pone a problem, rather than solve it. As Nouriel Roubini put itGreece, more likely than not ,isn’t just illiquid, but insolvent. And providing an insolvent country with money and forcing it to make painful cuts isn’t going to do it.

This seems to have been addressed yesterday when the Euro-zone countries agreed to extended the maturity of Greek debt by another 4 and 1/2 years, to 7 years. So this is a good development.

On another note,  the European Systemic Risk Board is being set up. This is probably the best development to come out of this entire mess we’ve gotten ourselves into since the beginning of the year.

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