LONDON — It took long enough, but the basic outline of a deal on the euro was agreed by leaders of the 17 euro zone nations this morning at 4:00 a.m. Brussels time.
It was as advertised in my primer yesterday:
Private banks will take a 50 percent haircut on the Greek bonds they hold, which amounts to about a third of the total Greek debt outstanding. Banks will recapitalize themselves via fund-raising issues and the IMF. The European Financial Stability Facility — which started with 440 billion euros and now has about 250 billion available after Greek, Portugues and Irish bailouts — will insure future sovereign bond issues to the tune of 20 percent. By a miracle of computation, that means that the fund has leveraged itself by a factor of 5 to 1.25 trillion Euros. (Honestly, I need to do that same trick with my salary ... )
"This is a marathon, not a sprint, "said Jose Manuel Barroso, president of the European Commission, the administrative arm of the EU. The race has only just begun. Heartbreak Hill — agreeing a euro-wide fiscal policy and other steps towards federalism — is nowhere on the horizon.