After 10 hours of negotiations the European Leaders from the 17 Euro zone countries finally agreed on the basis on solving the debt crisis that dragged for 3 months.
The main points in the plan includes:
- A 50 percent writedown on Greek Debt by banks, financial institutions and other bondholders.
- Boosting the European Financial Stability Facility (EFSF) to 1 trillion euros ($1.4 trillion US$).
- A bank-recapitalization package which require European banks to keep a core capital reserve of 9 percent after all the writedowns on their Greek (and other sovereign) debt.
Asian markets are rising as the news spread across the continentals. The European markets and US markets are expected to rise upon open with this resolution to the debt crisis.
Some of the details are yet to be released, there are news saying that China will participate in providing aid to the fund. The bank deal has a deadline set on June 30, 2012. For any banks below the 9 percent capital requirements when the date arrive, there will be a limitation put on the bank’s dividend payments and employee bonuses.
It is expected more details will come as we approach closer to the November G20 meetings. For now this good news should keep the market positive for the next few days. Also looking ahead next week, the Fed will hold its FOMC meeting and release its result on Wednesday. If there is any hint of a possible QE3, the market will continue to fly higher till the end of the year.