Eurozone Leaders Reach Agreement On Debt Crisis Resolution

In the early hours of 27 hours in Brussels, the eurozone leaders finally came to Greece after nearly 8 hours of marathon negotiations.

After hard negotiations,

To this end, the European banking industry has agreed to write down half of the holdings of Greek bonds, that is, the value of Greek bonds held by European banks will shrink by 50%.

It is reported that due to differences between Germany and France in the magnitude of the write downs, negotiations between the two sides have taken a lot of trouble.

Germany wants greater writedowns on Greek debt to mitigate future risks, but France fears that a significant write down will do more harm to its banks.

Therefore, the 50% reduction is also the result of compromise between the two sides.

According to estimates, according to the current write down scheme, the loss of European banking industry is around 100 billion euros (US $139 billion).

Respond to crisis "ammunition" increase

In the final agreement reached that day, another focus of concern was the expansion of the European financial stability instrument, because before the meeting, the euro area parties had a heated debate on the scheme.

According to French President Sarkozy, the leaders of the eurozone member countries have agreed to enlarge the scale of the existing rescue mechanism, namely, the European financial stability instrument to 1 trillion euros ($1 trillion and 390 billion), in order to deal with the debt crisis.

There are two ways to expand the capacity: one is to use the current European financial stability tool to guarantee a certain percentage of the issue of new treasury bonds for the problem countries; the other is to set up one or several "special purpose tools" (SPV) to finance European financial stability instruments.

Fan Longpei said that the essence of the two schemes is the leverage of European financial stability instruments.

But the summit did not know what the plan was to be adopted. The issue will be left for the EU and euro area finance ministers to be finalized later.

In addition, in order to consolidate the banking sector, eurozone leaders decided to raise the core capital adequacy ratio of major European banks by 9% by the end of June 2012.

Earlier analysis pointed out that in order to meet this capital standard, the European banking industry may need to increase 100 billion euros ($139 billion).