After the handshakes

Political agreements, figures, handshakes: the Euro crisis summit of October 26, called to address the urgent question of sovereign debt, provide stability to the euro currency and secure the community integration process, appears to have delivered expected results. Now the agreements ratified by EU 27 heads of government or state will need to be followed by concrete action. Keeping the promises. “We have agreed on a comprehensive set of additional measures reflecting our strong determination to do whatever is required to overcome the present difficulties”. Commission President José Manuel Barroso commented on the outcomes of the meeting, with a positive approach. In his opinion the national leaders convened in Brussels have given convincing answers to all five items included in the “work schedule” submitted two weeks ago by the Executive. As regards the situation of Greece, Barroso said: “Our objective is to reduce the Greek debt to sustainable levels. It is essential not only for Greece but also for the EU as a whole. The door is open to private investors to develop a second support program”. “We look forward to the conclusion of a sustainable and credible new EU-IMF multiannual programme by the end of the year”, but “Greece’s structural reform programme must continue”.Recovery and growth. Barroso welcomed the decisions on the extension of the rescue fund. “Third, on banks. The decisions taken yesterday by Member States will pave the way for a restoration of confidence in the European banking sector. These measures aim to make the sector more responsible and to restore its position as a service to the real economy”. The fourth item regards economic governance, notably in the euro zone. According to the EU Commission president, “the euro summit paves the way to stepped up coordination and surveillance”. “We are already working on concrete proposals in addition to the recent six-pack agreement”. Ultimately, “we have addressed the question of stability and growth”. “We need more fiscal discipline, but we also have to show Europeans that there is reason for hope, that we can get back on a path for growth by focusing on the internal market, through structural reforms. But also at national level, efforts aimed at stability must continue being implemented”.All the figures. As always, in economy, what counts are the numbers. And some figures are more important than others. As regards the situation in Greece, EU leaders are finalizing a new financial aid plan amounting to approximately 130 billion euro. The nominal discount will be 50% on national Greek debt held by private investors. The Council voted an agreement that should secure the decline of the Greek debt to GDP ratio with an objective of reaching 120% by 2020 (down from 143% at present). Greek bondholders (notably French and German banks holding Greek debt) agreed to voluntarily write down the value of Greek bonds by 50%, which translates into €100 billion. To step up the banking system the main banks (the so-called “systemic” banks) must raise more capital. This is a major endeavour that must be fulfilled by June 2012, especially by resorting to private investors. If not, Member States will intervene. Measures provide for the increase in the capital position of banks to 9% of Core Tier 1. Italy is also expected to fulfil set of commitments in the area of reforms (starting with the pensions system), as well as in the area of debt reduction, with a specific target: to bring about a reduction in gross government debt to 113% of GDP in 2014, while the capacity of the European financial stability facility (EFSF) will be extended up to one thousand billion euro.Recovered harmony? On the night of October 26 German chancellor Angela Merkel once more called for a modest revision of the Treaties, aimed at establishing stricter sanctions for those countries that fail to respect the Stability Pact. But the recovered harmony closes the summit with different intentions. In fact, one of the final documents states: “The euro currency lies at the heart of the European project of peace, stability and prosperity. We have agreed on a set of measures aimed at restoring confidence and address financial markets tensions”. These measures “reflect our unwavering determination to overcome together the current difficulties and to take all the necessary steps towards a deeper economic union commensurate with our monetary union”. Maybe Europe is ready to restart.