EU leaders agree to new measures to end euro zone debt crisis

PanARMENIAN.Net - European leaders agreed early March 12 to new measures intended to end the euro zone debt crisis, offering the debt-laden Greece a cut in its interest rate and injecting more flexibility into the way a bolstered bailout fund for the euro can be used.

The deal, which went further than had been expected at March 11 meeting of 17 euro zone leaders, came after a fierce dispute over corporate tax - putting France and Germany on one side against Ireland on the other, The New York Times reports.

Because of the standoff, Ireland, which like Greece has accepted a bailout from the European Union and the International Monetary Fund, has not been offered a reduction in its interest rate, now about 6 percent.

The early morning agreement came alongside a deal on a pact called for by Germany and France to tighten discipline in the euro zone. As expected, the current, temporary fund will be extended to allow it to lend its full 440 billion euros ($608 billion). The permanent fund that will replace it in 2013 will grow to 500 billion euros. Under the latest agreement, the European Union’s bailout fund will be able to buy bonds on the primary market but not on the secondary one.

In effect, that means that a nation could negotiate a program with the European Union under “strict conditionality,” making it possible for the bailout fund to buy bonds issued by that government. A country would have to agree an austerity program for that to happen.

However, those seeking a more comprehensive solution had pressed for more far-reaching changes, such as allowing the bailout fund to extend lines of credit to countries or letting it be able to buy bonds on the secondary market. Those ideas were not accepted.

Speaking at an early morning press conference, Chancellor Angela Merkel of Germany said the deal showed “the political commitment of the euro zone countries to work for the stability of the euro as a whole.”