European Union leaders continue to debate on a comprehensive plan to solve the eurzone’s debt and banking crisis. The crisis poses the largest threat to the euro since its inception over a decade ago. Talks have focused on three main challenges: restructuring the Greek government’s overwhelming debt load, strengthening European banks and creating an effective limited rescue fund. Expectations are low on a solution, as the last comparatively modest measures proposed took three months to be approved by the 17 euro area governments.
The largest challenge facing the EU is restructuring Greece’s debt. Banks and investors have been called to voluntarily accept larger writedowns on the value of Greek government bonds. Another fear is that reducing the amount Greece owes will prompt other debt-burdened nations to seek similar deals.
