Following the Eurozone summit meeting in Brussels, European Council President Herman Van Rompuy announced the results of the late-night negotiations: "From a series of national debt crises, the situation was evolving into a systemic concern, threatening the stability of the Eurozone as a whole. This threat has been contained."
First, the holders of Greek sovereign debt have voluntarily agreed to accept a write-down of their holdings by 50 percent which would be sufficient, he said, to bring down Greece’s debt-to-GDP ratio from its current level of 150 percent to 120 percent by the year 2012. Second, in exchange for additional austerity measures, Greece will receive another $140 billion from the IMF by the end of the year. Third, the “rescue fund,” or European Financial Stability Facility (EFSF), will be leveraged so that it will have available approximately $1.4 trillion to loan to countries that get into financial trouble in the future.
Next, the banks affected by the write-downs will be required to raise their net capital ratios from the current five percent to nine percent by next summer, and further austerity measures will be applied to those states applying for financial help in order to qualify for it.
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Photo of Herman Van Rompuy: AP Images