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The interest rate on Greek government bonds declined this week. After three months of agony the spread-yield of the ten-year Greek government bonds dropped to 783 points which is 50 basis points below the rates during the first day of the week. Scenarios for a common solution to debt problems of countries in the periphery of the eurozone have revived the financial markets and brought the first signs of restoring the confidence in the Greek economy.

The Athens Stock Exchange has also taken a breath and on Tuesday evening made a profit of 4.41% and turnover of 1663.60 points. According to a report by Credit Suisse, Greek shares are improving and foreign investment interest will begin to grow.

The idea of strengthening the role of the European stability mechanism also has had a positive impact on markets. The proposal of the German Chancellor Angela Merkel and the French President Nicolas Sarkozy for the Euro fund is expected to be considered at the next summit of European Union leaders. This will be the eurozone’s protective mechanism which provides guarantees for lending to poor members of the monetary union with the highest possible credit rating AAA. In other words, Germany, France, Holland, Luxembourg, Austria and Finland ensure cheap credits to countries such as Greece and Ireland. Through the accumulated capital the mechanism could also prevent countries such as Spain and Portugal from the capital markets attacks.

The plan is supported by both the European Commission President Jose Manuel Barroso and the Commissioner for Economic Affairs of the EU Commissioner Olli Rehn. In his opinion the Eurobonds are an important tool to fund the support mechanism and strengthen its capacity. The fund will also be able to buy part of the bond debt of countries in difficulty by substituting other longer term bonds for them, thus indirectly restructuring the debt.

Some economic analysts assessed this scheme is known for the application of Brady bonds. Their creator is the United States Secretary of the Treasury under Presidents Ronald Reagan and George H. W. Bush - Nicholas Brady. Brady bonds have originated for the need to reduce the debt of countries default in their paying. This was the case with some Latin American countries in the 1980s. Bulgaria also has benefited from this type of securities in 2002 with guarantees provided by the International Monetary Fund.

Brady bonds are issued by countries in return for their obligations to commercial and private creditors. Following an agreement with creditors, the debtor country issues long-term government bonds to replace the old debt structure with new one in the form of a portfolio of debt instruments. Their type and the ratio between the bonds define the payment mode of the  obligations - rescheduling or cancelling part of the debt or a degree of debt reduction.