Many analysts have been skeptical that the agreement reached Thursday by European leaders, which calls for banks to accept a 21 percent cut in the value of their Greek bonds, will bring lasting relief to Greece or ease market tensions.
But Charles H. Dallara, managing director of the Institute of International Finance, whose members include most large global banks, said the accord would help prevent fears about Greece from infecting other countries like Spain and Italy and undermining confidence in banks.
“The uncertainty swirling around this deal was catalyzing negative contagion in two directions,” Mr. Dallara said. “Now there is a sense that the losses are understood and broadly viewed as quite manageable.”
Mr. Dallara, who is based in Washington but spent five weeks in Europe before the deal was announced last week, said by telephone on Sunday that the rescue package would also give Greece a chance to turn around its dysfunctional economy.
“There is no other economy in Europe within miles of Greece in terms of distortions and imbalances,” he said. “If one can create conditions for growth, that will make all the difference. That will be the ultimate test of whether this will work.”
The Institute of International Finance has estimated that the deal will cost banks and other investors 54 billion euros, or $78 billion, but Mr. Dallara acknowledged that it was difficult to determine the real cost.
Some banks have had losses from holdings of Greek debt and others have not. Banks that swap their Greek bonds for new ones with lower interest payments, but more security, will take write-offs that will hurt earnings.
Before the deal, the European Central Bank firmly opposed any plan that credit rating agencies would see as a partial default, as is the case with this plan. But Mr. Dallara said that banks and government negotiators realized early in the talks that a default would be hard to avoid.
Rather, the talks focused on finding a way for investors to contribute, as Germany demanded, but in a manner acceptable to the banks and other bondholders. Mr. Dallara said a turning point in the talks came at a meeting in Paris in mid-July, when European governments agreed to a plan for banks to swap Greek debt for new securities backed by collateral.
From that point, talks focused on details of the plan, Mr. Dallara said. In the days before the announcement of the deal late Thursday in Brussels, Josef Ackermann, chief executive of Deutsche Bank and chairman of the institute, used his political acumen to complete the package with European leaders.
Mr. Dallara noted that Greece still faced a huge struggle, but said, “I think this gives Greece the wind at its back that it needs.”
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