What was agreed at the summit?

 

The deal has three main parts.

Banks holding Greek debt have accepted a loss of 50 per cent.

This is somewhat less than the 60 per cent politicians had sought but more than the 40 per cent banks reportedly were offering.

The aim is to bring Greece’s debt to GDP ratio to 120 per cent by 2020 in a bid to reduce Greek debt to manageable levels.

2 Banks must raise more capital to protect them against losses resulting from any future government defaults.

The new capital ratio – or the amount of reserves a bank must retain – has been increased to 9 per cent and banks have been given until mid-2012 to reach this target. To do this this they will need to recapitalise by selling assets.

This is lower than 10.5 per cent limit set for Irish banks in March of this year.

3 The scale of the euro zone emergency rescue fund, the European Financial Stability Facility, is to be increased to about €1 trillion.

The EFSF was originally given €440 billion. After providing aid to Greece, Ireland and Portugal, it has between €250 and €275 billion available.

This sum is to be quadrupled although the final figure will on be finalised after talks between finance ministers.

The agreement also contains ten measures to improve euro zone governance

A  The governance structure of the euro zone is to be strengthened and the economic union is to be enhanced to make it commensurate with the monetary union

At least two euro summit meetings per year to define “strategic orientations for the conduct of economic policies”

B  The president of the euro summit will be designated by the heads of state of the euro area

C  The president of the euro summit will keep non euro area member state informed.

D  The euro group will ensure closer co-ordination of economic policies and seek to promote financial stability. It will also seek to strengthen surveillance of member states' economic and fiscal policies

E  A decision will be whether the euro group president is full-time

F  The president of the euro summit, the president of the commission and the president of the euro group will meet, at least once a month

G  The euro group working group will provide preparatory level work for  euro group meetings

H  The euro group working group will be chaired by a full-time Brussels-based president

I  Existing administrative structures ( the Council General Secretariat and the EFC Secretariat) will be strengthened to provide adequate support to the euro summit president

J  Rules and mechanisms will be set up to improve communication and ensure more consistent messages from the euro group