EU leaders agree on measures to provide more support for countries with debt problems and restore financial stability to Europe.
The decisions made on 26 October are in response to the debt crises affecting some eurozone countries. These crises threaten to undermine economic stability in the whole currency area, and by extension other EU countries.
‘The package we have agreed is a comprehensive package that confirms that Europe will do what it takes to safeguard financial stability,’ said Commission president José Manuel Barroso.
More loans for Greece
A sustainable solution to help Greece recover includes a new loan of up to €100bn from the EU and the IMF. Banks and other private creditors have agreed to write off 50% of Greek debt. The package aims to help Greece reduce its public debt to 120% of gross domestic product by 2020.
Better crisis support
Leaders agreed to enlarge the EU’s main debt support fund, the European Financial Stability Facility (EFSF), without extending member countries' commitments. The fund’s lending capacity will be boosted to about one trillion euros – a fivefold increase – using private market tools.
Governments will provide guarantees for banks affected by the sovereign debt crisis. These guarantees will be coordinated at EU level. They will allow banks to continue to provide the loans needed for growth and job creation.
A temporary measure will require banks to increase their capital base to 9% by June 2012. Banks should reduce dividends paid to investors and bonuses to staff until they reach the 9% target.
This recapitalisation will strengthen the banking system. Banks will first use private sources of capital, with national governments providing support if necessary. Loans can also be made through the EFSF, as a last resort.
Stronger economic governance
Eurozone countries also approved measures to improve economic governance. There will be more coordination of economic and national budget policies, along with increased monitoring to ensure the measures are implemented.
The eurozone will seek closer economic integration. A report on implementing the agreed measures will be completed by March 2012.