Eurozone leaders agree rescue plan

Eurozone leaders including Chancellor of Germany Angela Merkel, have agreed a three-part agreement to deal with the Eurozone crisisEurozone leaders have sealed a three-part deal which they hope will convince markets they have an effective response to the growing economic crisis.
Officials in Brussels said an accord had been reached with banks on a 50% write-off of Greek debt, and they also approved a complex mechanism to boost the eurozone's main bailout fund to 1 trillion euro (£880 billion).

It means that, coupled with an earlier decision to recapitalise vulnerable banks, the summit has delivered on the package it promised.

The FTSE 100 Index was 2% higher on news of the agreement, while stocks in France, Germany and across Asia also opened on the up.
After the summit, EU president Herman Van Rompuy said the deal would reduce Greece's debt to 120% of its GDP in 2020. He added that the eurozone and International Monetary Fund would give the country another 100 billion euro (£87 billion).

The 10 hours of talks began with a meeting of all 27 leaders, including Prime Minister David Cameron. After 90 meetings they had endorsed the first part of the deal - boosting the liquidity of the most exposed banks in Europe.

The recapitalisation scheme does not involve UK banks, but forces many European banks to increase their reserves by more than 100 billion euro. The money may have to come from national coffers - effectively taxpayers - if the banks cannot raise the obligatory extra money through private investors by a deadline of next July.

Then the 17 eurozone leaders settled in for tougher negotiations, finally convincing the banks to take a 50% "hit" on their Greek loans repayments.

The third element, increasing a 440 billion euro (£383 billion) bailout fund, proved toughest, and the result is most open to attack from critics, who may also point out that a Greek debt write-off of 60% was considered by many to be the minimum necessary.

After the summit, European Commission president Jose Manuel Barroso said the EU had delivered "a comprehensive response to the sovereign debt crisis". But he warned: "These are exceptional measures for exceptional times. Europe must never again find itself in this situation."

© 2011 Press Association
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