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EU Stress Tests Include Writedown in Greek Government Bonds

European Union regulators’ stress tests on the region’s banks include a 25 percent writedown on Greek government bonds. The market has already driven down the price of 10-year Greek debt to 52 cents on the euro.

Regulators didn’t include the possibility of a sovereign default in the tests even though credit-default swaps indicate about an 87 percent chance that Greece won’t be able to repay its debts. The tests included a 22.3 percent writedown on Portuguese 10-year securities, while they currently trade at 54 cents per euro.