At the sovereign level the same logic should apply to hopelessly bankrupt Greece: it needs a debt write-down.
The two heads of a private-sector creditors' committee negotiating a debt write-down plan with Greece also joined talks at Mr. Papademos's office late Sunday.
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But some euro-zone policy makers feel they have heard these financial stability warnings before, not least over the Greek debt write-down, and no longer find them persuasive.
German officials Monday reiterated opposition to any Greek debt write-down.
Even with a debt write-down and bailout money it remains difficult to see how the Greeks themselves plan on restructuring their economy and public sector for a sustainable long-term.
It is worth recalling in the context of the current volatility that the European Commission published a follow up discussion paper on the proposed debt write-down tool in March 2012.
Mr. BEHRAVESH: Our best guess is about half of this will be spent, half of it will be saved, or maybe used to just write down debt.
Major European banks probably need a 500 billion euro transfusion to write down their debt holdings of weak sister paper from Spain, Italy and Greece.
AXA, the second-biggest insurer in Europe, has been offloading its investments in Greek debt -- at a 78% write-down -- and no longer buys Italian and Spanish debt, as it seeks to distance itself from the deepening crisis.
The summit's most notable achievement was to forge an agreement to write down the Greek debt held by the private sector by 50%.
Publicly created money without interest should be issued by governments to write down un-repayable debt and restart or stimulate stalled economies.
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Greece and its private sector creditors have yet to agree on a plan to write down the nation's debt by 50% -- a measure austerity-hit Athens needs to secure additional bailout funds and avoid default on bonds due in March.
With unions and major banks in line to accept major concessions, the last major hurdle was getting other lenders, mainly hedge funds, to write down most of their secured Chrysler debt.
As a consequence, a write-down of 30% of that debt could lead to a European financial crisis not unlike that which struck the U.S. banks from sub-prime mortgages.
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Details of the rescue plan discussed in Paris include a bigger write-down than previously expected of Greek debt, a much more powerful European bailout fund and a re-capitalisation of weaker banks to arm them against inevitable losses.
In Russia's case, the answer is to plead poverty, negotiate a thumping write-down of one chunk of its foreign debt, and start talks on another.
BlackRock said that based on its evidence, local government debt levels should be manageable even if state banks were forced to write down significant amounts of non-performing loans because of real estate.
Although the proposal to write down the face value of privately held Greek-government debt by 50% would be substantial and welcome, Greece's stock of debt would, even on best assumptions, still add up to 120% of GDP by 2020.
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Is it moral for American debtors to tell their Chinese creditors to write down the value of their investments in U.S. debt, particularly while out-of-control borrowing and spending by the U.S. government continues unabated?
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Most investors had already been expecting a relatively large write-down, based on the knowledge that UBS has been heavily involved in the issuing of collateralized debt obligations, or securities that have subprime debt packaged into them.
In January, the head of the independent UK Statistics Authority was moved to write publicly about a television broadcast the prime minister had made, suggesting the government was "paying down debt", when of course the truth is that debt is going up.
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