Greece bailed out again as leaders strike a deal
Ireland gets 2% cut in interest on loan repayments
Eurozone leaders finally capitulated to the inevitable last night and agreed to restructure Greece's unsustainable €350bn (£310bn) national debt in return for a second bailout package for the country.
Meeting under enormous pressure to get a grip on the debt crisis, the 17 heads of government signed off a new lifeline, with private investors for the first time shouldering a large share of the burden.
The deal goes a long way towards meeting demands by the German Chancellor Angela Merkel that banks be made to "share the pain" of bailouts.
Senior officials from leading European banks, who also met at the summit venue, agreed to provide about 20% of the funding, lowering Greece's burgeoning debt pile.
The softer lending conditions will also be applied to the multi-billion rescue loans for Ireland and Portugal as heads of state battle to prevent debt contagion spreading deeper across Europe and possibly going global.
Taoiseach Enda Kenny - who has long sought better terms for Ireland's crippling repayments - said Ireland's interest rate would now fall by around 2% from the current 5.8%.
He said it would be worth around €600-800m a year.
He added: "The flexibility that we sought under the fund is now available for Ireland.
"I am relieved to the extent that the conclusion of this meeting is good for our people and good for our country. We got a good conclusion to this meeting."
Mr Kenny said the Portuguese prime minister was also happy with the conclusions of the summit.
Euro leaders opted to double the maturity of the loans for the three bailed-out countries from seven-and-a-half years to 15 years, and cut the interest rate in an attempt to finally ensure the stability of the single currency.
In a joint statement, the leaders said: "The total official financing will amount to an estimated €109bn (£95.9bn)."
International support for Greece has now topped €200bn.
But just as the deal was being finalised, rumours began swirling that Cyprus could be next in line for a bailout.
Markets responded favourably to the deal, if only out of relief that negotiations had ended.
Bank shares and the euro, which had seen some volatile trading, stabilised as details of a draft agreement leaked out.
Yields on bonds issued by some of Europe's most overstretched countries fell.
Much, however, still depends on what market analysts make of the detail of the deal, and whether the credit ratings agencies will declare the deal a "credit event".
If they do and chose to view it as a "selective" default, it could still trigger a panic.
Investors may yet decide that the discounts now being applied, albeit voluntarily, to the holders of Greek government debt could be applied equally to Portuguese, Irish and - most dangerously - Spanish and Italian government bonds.
Should the interest rates demanded by investors to hold Spanish and Italian government bonds rise much more they would threaten a much larger default and sovereign debt crisis for the eurozone, and pose an existential threat to the single currency itself.
The leaders also agreed to:
- Review Ireland's current ultra-low rate of corporation tax;
- Reduce the interest payments previously agreed on the Irish, Portuguese and Greek bailouts;
- Allow the European Financial Stabilisation Fund to bail out banks and take "pre-emptive" action to rescue countries in trouble;
- Reject the French plan to raise €50bn for the bailout through a tax on banks;
- Shelve a Finnish proposal to make the Greeks pledge €30bn of state assets as collateral as loans.
Greek crisis: Facts and figures
£310bn The amount of Greece's national debt that prompted a second EU bailout
17 The number of heads of government who signed off a cash lifeline for Greece
£95.9bn Amount of the EU's latest bailout to aid the Greek economy