EU Deal Aims to Restore Confidence
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Members of the European Union, seeking a joint way to overcome Greece’s debt crisis – said they have reached a deal which aims to restore confidence in tense financial markets.
“Europe is closer to resolving its economic and financial crisis and to getting back on a path to growth,” said Jose Manuel Barroso, President of the European Commission.
“We know that agreements are not an end point. They mean the beginning of a long path of hard work,” he said.
The Euro Summit taking place on Thursday had six main outcomes.
1. Greek Debt“The solution found this morning includes a credible and appropriate degree of private sector involvement,” Barroso said.
“This will ease market pressure on Greece and allow the country to continue its program of reforms. We are determined to conclude work on a second financial assistance program by the end of the year.”
The agreement calls for the reduction of Greek debt to GDP ratio of 120 percent by 2020. Euro nations would contribute 30 billion euro to a “Private Sector Involvement” package.
Investors would see the value of their debt holdings drop by 50 percent.
In addition the European Union and International Monetary Fund would set up a new multi-year financing program of up to 100 billion euro by the end of the year.
Other measures include:
2. The European Financial Stability Facility – a loan fund for nations facing financial difficulties – will leverage it resources by 4 or 5 times to bring the fund up to 1 trillion euro. The details about doing so are expected to be determined in November.
3. Bank sector measures – facilitate access to term-funding at the EU level, increase the capital position of banks to 9 percent of Core Tier 1 by the end of June 2012.3. Fiscal discipline commitment – Spain, Italy, Portugal and Ireland in the process of structural reforms for growth and employment“A set of very specific measures to boost economic governance will be put in place.
4. Ten measures to improve the governance the Euro area
5. A mandate to European Council leadership to identify stops to strengthen the economic union, including the possibility of limited Treaty changes. An interim report is set to be presented in December of 2011 and a report on how to implement the measures will be finalized by March 2012.