Merkel drops requirement of haircut for private bond holders
France and Germany announced on Monday they had reached an agreement over a new set of fiscal rules for the eurozone that they will ask EU members of the currency union to approve at a summit on Friday, the Financial Times reports. The new measures include amendments to the EU’s governing statutes to ensure that countries maintain balanced budgets. German Chancellor Angela Merkel also reportedly agreed to drop a provision requiring private bond holders to bear some of the losses involved in sovereign debt restructurings, a point Berlin insisted on earlier this year when coming to Greece’s rescue. Fear among investors that they may not be repaid when holding bonds from other highly indebted governments such as Italy and Spain resulted in steep increases in the yields of those countries as well.