Greek support based on continued reforms

TALLINN - Measures for achieving stability and restoring confidence in money markets have been agreed at the unofficial meeting between the European Union’s heads of state and government and the subsequent eurozone summit in Brussels. “Although today’s discussions centered on problems in the euro area, on a number of questions, such as strengthening Europe’s banks or possible amendments to the treaties establishing the European Union, all of the member states must reach agreement, not just the ones that use the euro,” said Prime Minister Andrus Ansip, who represented Estonia, regarding the two coinciding meetings, writes the office of the prime minister.

The European Council’s discussions focused on strengthening confidence in banking; above all, strengthening the capital base and ensuring financing for the banking sector. In accordance with a joint decision, banks must raise core capital ratios to at least nine percent by the end of June 2012.
The topics addressed at the euro area summit, which lasted until the early morning of Thursday, focused on Greek sovereign debt, more effective measures for countering crisis, measures for promoting stability and economic growth and making leadership in the euro area more effective.

The leaders said that private lenders had to accept a significant write-down of their claims against Greece. Under the agreement, the Greek debt ratio must fall to 120 percent of GDP by 2020.
A multi-annual financing program between the European Union and the International Monetary Fund that will channel up to 100 billion euros will be put in place by the end of the year. It will mean more stringent control of the reforms to be carried out in Greece.

“The basis for everything in regard to assisting Greece continues to be conditionality and reforms,” commented Prime Minister Ansip.
The heads of government of the eurozone also decided to increase the efficacy of the European Financial Stability Facility (EFSF). The four- or fivefold financial leverage will function without increasing the guarantees thus far pledged by the countries.
“Giving the EFSF greater leverage is in the interests of the entire euro area, naturally Estonia as well,” said Ansip.
The leaders of the eurozone also stressed at the meeting that ended last Thursday morning the importance of consolidating budgets throughout the European Union.

In addition, they emphasized the need to strengthen coordination of economic policy in the euro area. It was decided that euro area summits would take place at least twice a year.