EU Heads of State agreed on measures to tackle the economic crisis in Euro

"I am very happy with the results. We were able to resolve all items on the agenda,” said Prime Minister Katainen who represented Finland at the meeting.

The Heads of State or Government of the euro area reached agreement on the Greek loan facility. The agreement should secure the decline of the Greek debt to GDP ratio with an objective of reaching 120% by 2020. Private bondholders will face a 50% nominal discount on the face value of their bonds.

The European Financial Stability Facility (EFSF) will be leveraged to prevent the spillover of the debt crisis to new countries. Changes in the Financial Stability Facility will enable to channel contributions from countries with a large external surplus to the resolution of the crisis through the IMF. The amount of the euro countries' total bail-out was not however, increased.

To stabilise the European banking sector, the core tier ratio of banks must be increased to 9% which at the EU level amounts to EUR 106 billion in recapitalisation. Banks should first use private sources of capital and national governments only as a secondary consideration. If national government support is not available, recapitalisation should be funded, under strict conditions, via a loan from the EFSF.

The meeting also agreed on several measures with which to reinforce economic and fiscal surveillance in the euro area and to reorganise its structures. The euro countries agreed on stringent measures as regards countries that do not comply with their adjustment programmes. They also decided to hold regular Euro Summit meetings and designate a permanent President to the Euro Summit. Italy and Spain reported on their concrete actions to consolidate the public finances.

Inquiries: Joonas Turunen, Special Adviser, tel. +358 9 1602 2366 and Kare Halonen, State Secretary, EU Affairs, tel. +358 9 1602 2180, Prime Minister’s Office