European banks this morning agreed to take a 50% loss on Greek debt, a critical step towards ending the financial crisis gripping the euro zone.

“The results will be a source of huge relief to the world at large, which was waiting for a decision,” President Nicolas Sarkozy of France told NYT.

After putting up considerable resistance, European banks have finally come to grips with the fact that if you give someone no chance to get out of debt, no matter how deserved that debt is or how foolish they were in getting into it, you’ll never get paid back. They also realized that if the euro system crumbled, it would be bad for business. They’re very reasonable people like that.

One of the ways Greece got into the massive debt problem by hiding its deficit spending as a way to gain entry to the euro zone. The spending was hidden, and the debt grown, in a vast array of exotic derivatives designed by American financial firms who received hefty sums in for their alchemical services. The financial institutions insulated themselves from any risk and walked away in slow-mo as the mess they catalyzed exploded behind them.

Europe Agrees to Basics of Plan to Resolve Euro Crisis [NYT]

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.