The Bangko Sentral ng Pilipinas said the financial burden sharing reached in the European summit should calm markets in the Philippines and across Asia, at least temporarily.
According to BSP Governor Amando Tetangco Jr., what will help prevent another round of market volatilities is the realization of the commitments made by all parties during the summit.
“The agreements are comprehensive but require the cooperation of the European leaders, multilateral agencies like the IMF (International Monetary Fund) and the private sector,” Tetangco said.
“The burden sharing has been laid out, but this, I believe, rests quite firmly on what the statement calls ‘reaffirmation of the inflexible determination’ among member-states to honor all their commitments to sustainable fiscal conditions and structural reforms.”
In the meantime, Tetangco said, the ability of European leaders to agree on a set of reforms would enable global financial markets to again base their investment decisions on fundamentals of countries rather than on sentiments arising from the crisis in the eurozone.
Last month, financial markets became quite volatile partly due to pressures exerted on the peso and the currencies of other emerging markets. Markets were spooked by the prolonged crisis in Europe, making investors doubt the ability of the global economy to recover more sharply from the 2009 recession.
In the eurozone summit, the leaders agreed to let holders of Greek bonds, led by banks, to absorb 50-percent loss from their investments.
Policymakers said banks would have to take a hit as well, otherwise, Greece would become insolvent—something that could create even bigger problems for the continent.
The European leaders are working to cut Greece’s debt to 120 percent of its gross domestic product by 2020 from the projected 170 percent by 2012.
“I hope that this [eurozone agreement] would usher the beginning of the end of the European debt crisis,” Tetangco said.
World Bank Group president Robert B. Zoellick echoed the BSP’s sentiments, saying that the developmental institution hopes the agreement will lay the foundation for a firmer global economic recovery.
“The development in the eurozone is good news. We hope that the next development would be recovery,” Zoellick said Thursday during a press conference held at the Manila office of the World Bank.