Europe seals deal to end debt crisis
Europe sealed a last-ditch deal on Thursday to fix its festering debt crisis, shoring up its bailout fund, pledging new funds for Greece and pushing banks to share the pain at a summit vital to the health of the global economy. Light at the end of Euro tunnel
Europe sealed a last-ditch deal on Thursday to fix its festering debt crisis, shoring up its bailout fund, pledging new funds for Greece and pushing banks to share the pain at a summit vital to the health of the global economy.
The agreement was reached after more than eight hours of hard-nosed negotiations involving bankers, heads of state, central bankers and the International Monetary Fund.
At the same time, the euro zone will offer “credit enhancements” or sweetners to the private sector totalling €30 billion.
The aim is to complete negotiations on the package by the end of the year, so Greece has a full, second financial aid programme in place before 2012, leaders said
The value of that package, EU sources said, would be €130 billion.
“The summit allowed us to adopt the components of a global response, of an ambitious response, of a credible response to the crisis that is sweeping across the euro zone,” said French President Nicolas Sarkozy.
Besides, eurozone leaders also agreed to scale up the European Financial Stability Facility, their €440 billion ($600 billion) bailout fund set up last year.
The EFSF will be leveraged in two ways, either by offering insurance, or first-loss guarantees, to purchasers of euro zone debt in the primary market, or via a special purpose investment vehicle that will be set up in the coming weeks and which is aimed at attracting investment from China and Brazil. The methods could be combined, giving the EFSF greater flexibility, the euro zone leaders said.
The fund has already been used to provide help to Ireland, Portugal and Greece, leaving around €290 billion available.
Following the deal, global markets rose across the board as the euro hit a seven-week high.
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