Europe Steps Up
Policy makers move towards a solution

LONDON, October 19, 2011 – "Gone is the perfunctory claim that 'Greece is solvent.' Gone is the travesty of 'strong capitalization' of the Europe banking system," said Deputy Chief Economist Adolfo Laurenti. "Finally, leaders of the euro area have reconciled themselves to the inevitability of such an outcome (a Greek default), so they are now discussing the size of the haircut for bondholders," he explained in his October issue of Themes on the Global Markets.
Laurenti makes the following points:

• "The euro area is facing a threefold challenge: Greek insolvency, insufficient bank capital and the risk of contagion spreading throughout the continent."
• "An orderly management of Greek default and bank stabilization might alleviate the risks of a disorderly flight out of Portugal, Italy and Spain."
• Laurenti is confident that a solution will be reached and that "it will be a deal grounded in the deep bonds between European countries, bonds that are political, cultural and historical before they are economic."

The October issue of Themes on the Global Markets^® as well as archived issues can be found at mesirowfinancial.com.

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