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Decision On Debt At Brussels

  • October 27th, 2011
  • Posted by EUEditor

eu-berlaymont.jpgThe gathering of European Heads of Government at Brussels (26.10.11) has announced a three-point plan for stability and a resolution of the Greek debt crisis.

Talks going up to ten hours produced the terms of agreement:

Banks are to write off 50% of public debt owed by Greece.

The reserve fund set up to guarantee further borrowing by Greece, through the EU stability fund, the EFSF, which is to be expanded on a grand scale, to EU1000-billion (A$1332-billion, 27.10.11).

A plan already agreed on, to recapitalise European banks, will be effected.

The German Chancellor, Angela Merkel, emerged from the meeting of “Eurozone” states, within the European Union, saying the cuts agreed to by the banking industry, under firm pressure, would be a “nominal haircut”.

She said surveillance measures would be stepped up to follow compliance by Greek authorities with the terms of agreement, including fiscal tightening.

Monitoring in Greece would be continuous, unlike the practice to date of periodic visits by inspectors from the “troika” EU, International Monetary Fund and the European bank.

She said that compared with the agreement made on Greece last July, “considerable progress has been made”.

In July the heads of government of the Eurozone, the 17 countries using the Euro currency, extended provisions for Greece by agreeing to an additional €109-billion, for the first time including a private sector commitment, of about one-third of the total.

Later analysis showed that much larger commitments would be needed to prevent the country defaulting on its debts, and creating a contagion of pressure on other governments – beginning with  Portugal, Ireland, Spain and Italy.

See also, EUAustralia Online, “European Summit: New package for Greece”, 22.7.11.