Thursday's EU summit in Brussels announced new plans for tackling the Eurozone crisis. This column says that restructuring of Greece's debt will reduce Greece's access to external financing without reducing its debt burden to sustainable levels. It suggests additional financial support contingent on larger haircuts.
European officials have struggled for weeks to reconcile the competing priorities of Germany and other surplus countries with those of Greece. Until Thursday's summit, the EU treated the debt crisis as a liquidity problem rather than a solvency problem. This contributed to the market turbulence and allowed the crisis to spread to Italy. This undermined confidence and threatened the stability of the euro itself.
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