RENEE MONTAGNE, HOST:
This is MORNING EDITION from NPR News. I'm Renee Montagne.
ARI SHAPIRO, HOST:
And I'm Ari Shapiro. Good morning. European leaders met late into the night in Belgium, and now they say they finally have a deal. They're hopeful that this plan will help guide the continent out of the debt crisis that started with Greece and has since spread. Key details still have to be worked out and it's unclear whether European leaders have the political will and economic flexibility to implement the plan, but so far markets have responded positively. NPR's Eric Westervelt reports on a long night in Brussels.
ERIC WESTERVELT, BYLINE: European leaders had vowed that Wednesday's summit - the second EU meeting in four days - would deliver nothing less than a roadmap to finally guide the eurozone out of the debt crisis. As talks began, Greek Prime Minister George Papandreou said the summit was not just about saving the euro currency but also about safeguarding the very ideals at the core of a united Europe.
PRIME MINISTER GEORGE PAPANDREOU: Peace and cooperation amongst our nations, social cohesion and solidarity without prejudice amongst our people.
WESTERVELT: After some eight hours of marathon talks that ended around 4 a.m. local time, eurozone leaders said they'd secured an agreement for banks to take a voluntary 50 percent loss on Greek bonds. That plan aims to reduce Greek debt to 120 percent of gross domestic product by 2020 from its current 160 percent. The officials also said they would boost the power of the eurozone's bailout fund to around $1 trillion. This would be done by offering insurance to debt buyers or through a special fund that will be set up aimed at attracting investment from China, Brazil and elsewhere. The European Council president Herman Van Rompuy conceded that key details on how that part of the plan will work remain to be worked out, adding: It's not easy to explain but we're going to do more with our available money; banks have been doing that for centuries - end quote.
There was also agreement to make European banks significantly boost their capital reserves by the end of next June to better protect them from possible government debt defaults. In July, banks had agreed to take a 21 percent loss and had fiercely resisted a deeper cut. But in a statement this morning, the head of the group representing big banks called the deal a comprehensive package to stabilize Europe. German Chancellor Angela Merkel said the plans should reassure the world about the future of the eurozone.
CHANCELLOR ANGELA MERKEL: (German spoken)
WESTERVELT: I believe we were able to live up to expectations, that we did the right thing for the eurozone, Chancellor Merkel said, and this brings us one step farther along the road to more stability and a stable union.
Leaders also announced plans to improve economic governance of the eurozone. European heads of state were under pressure from the markets and world capitals to forge a deal ahead of a key meeting of the Group of 20 in France early next month. Sony Kapur, the director of the economics think tank Re-Define, says eurozone leaders are finally tackling the heart of the debt crisis, and their solutions are pointing in the right direction. But he says eurozone leaders have wasted too much time. It's already too late, he says, for the several million Europeans who've lost their jobs and too late for the eurozone economies that are slipping into recession. Kapur says the financial world is right to be skeptical that the leaders can expeditiously implement yet another rescue plan.
SONY KAPUR: It's going to take a massive, gargantuan, unprecedented effort of political will that we have so far not seen from our leaders. They have been parochial, they have been petty, they have procrastinated. And they're going to have to get their act together; otherwise this is already too late.
WESTERVELT: On Italy, Europe's third largest economy, eurozone leaders put enormous pressure on Prime Minister Silvio Berlusconi to make good on specific reform plans, including big changes to government pension plans and pledges to boost the retirement age. It's not at all clear that Berlusconi's weak ruling coalition can deliver on those promises. The European Commission's president, Jose Manuel Barroso, said this morning it's now time for Italy to deliver.
JOSE MANUEL BARROSO: The key is implementation. This is the key. It is not enough to make commitments. It is necessary now to check if they are really implemented.
WESTERVELT: Barroso may as well have been speaking about the entire new plan to rescue the euro. Eric Westervelt, NPR News, Brussels.