July 22, 2011
European leaders have sealed a new €109bn bailout for Greece and erected defences against the debt crisis spreading to Italy and Spain by turning the eurozone's 15-month-old bailout fund into a much more ambitious instrument resembling an infant European monetary fund.
The deal, hatched at an emergency summit in Brussels of eurozone leaders, following months of dithering and division, also entailed large losses for Athens' private creditors, making it almost certain that Greece would become the first eurozone country to be deemed to be in some form of default on its sovereign debt.
A 16-point blueprint provided for a vast expansion in the role and powers of the €440bn bailout fund established in May last year. The package agreed after weeks of bad-tempered, intense haggling and only resolved at the last minute, was the biggest response from the eurozone since it created the bailout fund.
Currently the fund can only be used as a "last resort" to rescue a eurozone country whose plight jeopardises the stability of the euro as a whole.
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