The deal paves the way for a German-backed initiative for more direct measures to get private holders of Greek bonds to help pay for the bail-out. According to a version of the plan circulated by the European Commission on Wednesday evening, all owners of Greek bonds that come due in the next eight years will be urged to swap their holdings for new bonds that do not mature for another 30 years. Other plans, however, including a French-backed bond rollover plan, are believed to still be on the table.

To arrive at such a stark conclusion, one has to understand the nature of the threat the eurozone is facing. The problem is not Greece, or some other small country on its periphery. The existential danger is the rise in market interest rates of Italy and Spain, two large countries in the eurozone's core. To state the goal of today's meeting in simple terms would be to say: the survival of the eurozone depends on whether its leaders will be able to take decisions that would allow Italy and Spain to remain inside the eurozone on a sustainable basis. Greece is now just a side-show.

To ensure that the eurozone survives the next few weeks, they will need to take two important decisions on Thursday. The first, and most important, would be an increase in size and flexibility of the European financial stability facility, the rescue umbrella. At present, the overall size of the EFSF, including the share of the International Monetary Fund, is €750bn. With a second Greek credit about to be agreed and second programmes for Ireland and Portugal very likely, the ceiling will not be big enough to bring in Spain, let alone Italy. To do that that, the ceiling would have to be doubled, or trebled. One could think of other constructions, such as having no fixed limits at all or sliding limits. The structure of the EFSF would have to be changed if it was going to be made this big. It would have to be properly capitalised. Italy's share in the EFSF 18 per cent would otherwise not be credible.

Since the leaders of countries like the Netherlands, Finland and Germany haven't prepared political or public opinion for what needs to be done, he doesn't think it will be done. The Euro may be screwed. Depends where our leaders' cowardice takes them.

...or Plan I for Ireland; Plan S for Spain; choose your letter......

"The future is already here -- it's just not very evenly distributed" William Gibson

I'm not optimisitic that anything Trichet and Merkel are willing to wear is worth doing

I don't like their clothes either. ;)

They are still trying to apply monetary policy solutions to a situation requiring fiscal policy intervention.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

Major beef-up for the EFSF and ESM. Lower interest rates and extended maturities on future loans, with a "grace period of 10 years". Ireland and Portugal get the same deal.

"Financial sector" haircut of €37 billion; interestingly, no mechanism specified! But this is the first step of a write-down.

"Marshall Plan" reference is removed, but EU funds and the EIB are to be mobilized by the Commission's task force, to target "competitiveness and growth, job creation and training". This is such a wide remit that the effects depend on who's driving, and their ideological orientation.

EU parliament ordered to finalize and vote the "strengthening" of the "Stability and Growth Pact", member states agree to help the Polish presidency to bully the Parliament into submission on this. That should be interesting...

_{It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II}