Eurozone deal agreed for Greece
Banks will have to write off 50% of their Greek debts as part of the Euro Summit's proposals announced this morning.
Jose Manuel Durao Barroso, president of the European Commission, calls the raft of measures "a comprehensive package that confirms Europe will do what it takes to safeguard financial stability".
The summit's three-pronged proposal focuses on reducing Greek debt by wiping off 50% of private banks' debt held against Greece. This would reduce Greek debt from 160% of GDP to 120% by 2020.
The eurozone's central bailout fund will also be increased to €1 trillion (£880 billion) and the European banks must together provide another €106 billion of capital to protect themselves from future sovereign crises.
Leaders of the eurozone countries thrashed out the deal in response to growing concerns about the debt crisis, accentuated by Greece's problem.
The summit applauded other debt-ridden countries Spain and Italy for their efforts but says "further action is still needed".
Speaking yesterday evening, Prime Minister David Cameron said "good progress" had been made and that the agreed measures "hadn't been watered down".
"We made some good progress tonight. It's very much in Britain's interests that we sort out these problems and solve this crisis."
Industry experts are reticent about the proposals. Dominic Rossi, global chief investment officer for equities at Fidelity Worldwide Investment, says the summit's deal isn't a "game changer".
He adds: "The 50% Greek writedown is an important step forward, although I would like to see more details. The Greek writedown sets a watermark for other European countries. How does Italy look on this basis?
"The eye of the storm will now move to Rome and its fragile government. I don't think yields on Italian debt will fall on the back of this agreement for long."
Rossi expects economic growth to remain restrained and that equities will continue to be cheap.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).