Greece flounders and banking crisis looms

The deepening European debt crisis has claimed its first bank victim. Can European policy makers do enough to allay fears of a full-blown banking crisis?

The eurozone debt crisis is threatening to turn into a banking crisis. Greece has confirmed that it will miss its budget deficit target for this year. The EU and the IMF are withholding the latest tranche of rescue package cash, which was supposed to be disbursed by mid-October. They are expected to extract new concessions from Greece before handing over the €8bn.

So much for the first Greek rescue package, agreed in 2010. There were fears this week that part of a second Greek rescue, agreed in July, will unravel. Some governments want this deal, which envisaged haircuts of 21% on Greek debt, to be renegotiated to make investors take bigger losses because Greece's debt pile has ballooned.

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