EU Leaders Announce New Eurozone Rescue Deal | Europe

EU Leaders Announce New Eurozone Rescue Deal
Andy Dabilis

The leaders of the 27 EU nations agreed on a new package of measures aimed at containing the eurozone's lingering crisis after difficult overnight talks that ended on Thursday (October 27th).

The deal, which calmed global markets and was welcomed by international officials, was reached after private banks and investors agreed to take a 50% loss on their Greek holdings. That would reduce the Balkan nation's total debt burden to 120% of GDP by 2020, down from 160% of GDP today.

The plan -- agreed upon after more than eight hours of closely watched marathon talks -- also includes a new 130 billion-euro bailout from the EU and the IMF for Greece to replace the 109 billion-euro one agreed to in July.

The package also includes a bank recapitalisation plan approved earlier, under which European banks will be required to keep a minimum capital buffer of 9%, forcing them to find an additional 106 billion euros by June 2012.

"The overarching goal of the exercise is to foster confidence in the European banking sector," EU President Herman Van Rompuy said at a news conference after the summit in Brussels.

The plan they agreed on also envisions increasing the European Financial Stability Facility (EFSF), the eurozone's rescue fund, to at least 1 trillion euros, to prevent the debt crisis from spreading across the 17-nation club of EU nations using the euro.

"The package that we have agreed on tonight, a comprehensive package, confirms that Europe will do what it takes to safeguard financial stability," European Commission (EC) President Jose Manuel Barroso said at the news conference Thursday morning.

Welcoming the deal, World Bank President Robert Zoellick praised the EU leaders and urged them to implement the measures, whose details are to be worked out by the end of this year.

"I'm hopeful that this first important step will lay the foundation for a broader approach that will focus on helping the world economy resume growth, overcome joblessness, and support innovations so we can get the world economy back on track," he said.

While reluctant to make any comments on specific elements of the plan in the absence of any details, Georgi Stoev, head of Industry Watch, a Sofia-based consulting company, said the new measures imply that new euros will be printed.

"This will push up inflation and reduce Bulgarians' purchasing powers," he told SETimes.

The new bailout for Greece will see the current arrangement of EC, IMF and European Central Bank auditors visiting the country every three months to review its progress in meeting the terms of the first bailout replaced by a "monitoring capacity on the ground".

Greek Prime Minister George Papandreou also hailed Thursday's agreement, pledging further domestic efforts.

"After the battle we have won, which is of huge importance for the country ... we will continue to work intensively so that Greece becomes productive," the AFP quoted him as saying on Thursday.

- Provided by Southeast European Times