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by Danielle Kurtzleben
Greece deal brings relief, but the euro zone has much left to do in stabilizing itself
After a long night of negotiations,
The 10 hours of talks resulted in EU leaders agreeing on a number of measures aimed at addressing the euro zone's broad problems. The package targets cutting Greece's debt substantially, with private holders of Greek debt taking a voluntary 50 percent "haircut," receiving only half of what they are owed. The agreement also greatly expands the European Financial Stability
Facility, the euro zone's fund for bailing out troubled countries, from
Banks are also expected to raise additional capital, both to cover losses on sovereign debt and show that they can survive future shocks.
The EU deal is a sign of substantial progress, but the larger European crisis is still far from over,
"This is the 14th euro zone leader summit in the last 21 months, and there are going to be many, many more over the next 21 months. So this is not the endgame by any stretch of the imagination," he said in a conference call.
Broadening the scope from Greece to the entire euro zone is a reminder that it is not just the size of a state's debt but the size of its GDP that is important in this crisis.
Spain and Italy are the two prime examples of larger economies
dealing with heavy sovereign debt. "Obviously Spain and Italy
are the main concern in all of this. Obviously Greece is the biggest problem
country at the moment, but in the scheme of the size of euro zone, it's miniscule," says
With debt at 120 percent of GDP, Italy is a particular worry to the European economic
community. In an attempt to reassure EU leaders of his commitment to fixing Italy's
debt problems, Italian Prime Minister
However, considering Berlusconi's domestic political problems including numerous sex scandals, not to mention deep divisions over his retirement age proposal, some international watchers are skeptical of his commitment to reining in debt.
"If you're in Italian leadership, if you're a politician in Italy, you've got to
respond to the realities of Italian politics,"
Even if the continent settles its debt woes, economic growth remains a longer-term worry for many EU countries. Germany, the largest European economy, earlier this month cut its growth forecast from 1.8 percent to 1 percent. And with governments pulling back on spending to deal with their debt, that could further impair economic growth in the months and years to come.
"European Union Leaders Reach Deal on Greece, but Worries Remain"