A Greek commentary of his summarizes all this in its title: "Too little, too late".

The road of excess leads to the palace of wisdom - William Blake

"According to our models, austerity combined with the first feeble aid package should have provoked instant economic growth and a burgeoning tax take, filling the budget deficit and opening the path to growth-led prosperity. Instead, it provoked massive economic shrinkage and near-default. What went wrong? Did we slip a decimal place somewhere?"

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

(6) It follows from these conclusions that the excessive
deficit in Finland has been corrected and Decision
2010/408/EU should therefore be abrogated,
HAS ADOPTED THIS DECISION:
Article 1
From an overall assessment it follows that the excessive deficit
situation in Finland has been corrected.
Article 2
Decision 2010/408/EU is hereby abrogated.
Article 3
This Decision is addressed to the Republic of Finland.
Done at Brussels, 12 July 2011.
For the Council
The President
J. VINCENT-ROSTOWSKI
L 187/28 EN Official Journal of the European Union 16.7.2011

Whew. Thought we were gonna lose Sven and sgr2.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

You can't say fairer than that...

You can't be me, I'm taken

8.38pm: Time for a couple of questions. And they're both good ones.

A Bloomberg reporter asks for details on the issue of the EFSF being given to buy Greek debt in the secondary market - where sovereign debt is traded between investors. Does this mean that Greece will be able to buy its own debt back, at a discount to its nominal value?

Yes, replies van Rompuy. This mechanism can be used both for stability (eg, persuading investors that Greek debt still has value) and for debt reduction.

Outbreak of sanity? M Trichet will have a coronary.

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

The European Council agreed on a package for Greece and changed the rules of the EFSF; initial market reaction was euphoric as Spanish and Italian yields came down; agreement includes a new Greek EFSF/EU programme of €109bn; the private sector will contribute €50bn until mid-2014, and €106bn until 2019; participation scheme will attract a temporary SD rating; package includes funds for bank recapitalisation and collateral enhancements to allow Greek banks to borrow from ECB; EFSF loans' maturities will be lengthened to 15-30 years, and interest rates cut to 3.5%; this also applies to Ireland and Portugal; EFSF can act pre-emptively, and will get flexible credit lines, right to buy bonds in secondary markets, and to recapitalise banks; details of PSI to be worked out with IIF; European Council also agreed on what it called a Marshall Plan for Greece, with more EU investments flowing into the region; Nicolas Sarkozy calls it the beginning of a European Monetary Fund; FT calls it a political victory for Angela Merkel; Hans Werner Sinn says agreement amounts to economic blackmail against Germany; other German economists are more balanced in their assessment; FT Deutschland gave a cautious endorsement of the agreement; Les Echos celebrates Nicolas Sarkozy as the eurozone's crisis manager; Dominique Seux writes the EU will need many more such agreements to overcome the crisis; Jean Quatremer called last night's summit a beautiful success that proved the eurosceptics wrong; the Irish Independent welcomes the €800m a year reduction in Irish interest payments; the FT's Lex column says the market reaction is too extreme; Nouriel Roubini says the reduction in net present value is not sufficient; Paul Krugman focuses on the EU's wish for everybody to save at the same time, to be competitive against each other; Bild, meanwhile, is jubilant about the fact that Greece is now bankrupt.

Earlier today, Fitch announced it would be the first rating agency to declare Greece has defaulted, albeit on an interim basis. According to Reuters, Fitch Ratings will declare Greece in restricted default on its debt due to the steps taken in a new euro zone rescue package but will likely assign new ratings of a low speculative grade once a bond exchange is completed, the agency said on Friday. The agency said that the reduction in interest rates Greece is paying on its debts and extension of maturities gave it a chance of regaining solvency and would support its rating. "Fitch will assign new post-default ratings to Greece and to the new debt instruments once the default event is cured with the issue of new securities to participating bondholders," the agency said. "The new ratings will likely be low speculative-grade."

Major beef-up for the EFSF and ESM.

The EFSF and ESM are given more flexibility in their action. However, there is no increase in the size of their available financial resources. And the EFSF's vaunted €750bn are mostly guarantees. From Wikipedia:

The EFSF can issue bonds or other debt instruments on the market with the support of the German Debt Management Office to raise the funds needed to provide loans to eurozone countries in financial troubles, recapitalize banks or buy sovereign debt. Emissions of bonds would be backed by guarantees given by the euro area member states in proportion to their share in the paid-up capital of the European Central Bank (ECB).

The Facility may be combined with loans up to €60 billion from the European Financial Stabilisation Mechanism (reliant on funds raised by the European Commission using the EU budget as collateral) and up to €250 billion from the International Monetary Fund (IMF) to obtain a financial safety net up to €750 billion.

If there is no financial operation in activity the EFSF would close down after three years, on 30 June 2013. If there is a financial operation in activity, then the Facility would exist until its last obligation has been fully repaid.

In other words, the capital that the EFSF will have available to stabilize the markets has to come from the market itself.

Economics is politics by other means

Italy will have to take further steps to lower its public debt, German Chancellor Angela Merkel said on Friday, adding that Rome's austerity programme was good. "Italy's austerity programme was absolutely good. But it will be a process and demands further steps in the future," Merkel told a news conference.

"The summit agreement from yesterday lowered the risk of contagion," she added.

Alas, going through the merits of this Agreement is akin to discussing a decent plan for extending the Maginot line through Belgium after Hitler had taken Paris. In short, the horses have bolted and we are debating the merits of the new barn gates. Am I exaggerating? Read Article 7 of the agreement to see that I am not. After Article 6 states that the haircut concerns Greece and Greece alone ("we would like to make it clear that Greece requires an exceptional and unique solution"), Article 7 adds: "All other euro countries solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms." In other words, the pledges that Greece was making till now, the rest (e.g. Ireland) will continue to make independently of their capacity to meet them. This is priceless gift to speculators who love nothing more than testing such unsustainable `solemn' and `inflexible' commitments on behalf of governments and EU bodies with a long history of such declarations that are confirmed more in the breach than in the observance.

...

Now, if these three steps were enough to ringfence Greece, their implementation cost would be manageable and their outcome desirable. Unfortunately, this type of ringfencing is at least a year too late. Back then, prior to May 2010, the cost of these measures would have fallen below the EFSF's €450 billion funding base. Today, the cost has skyrocketed to around €2 trillion. For it is impossible to imagine that Greece will be borrowing at 3,5% while Spain is struggling to roll over its huge debts in the money markets at more than 6%. And it is preposterous to imagine that any sensible person will be convinced by our leaders' oath that the Irish debt will not be restructured when the Greek debt is subjected to a menu of alternative haircuts. Additionally, it is mindnumbingly perverse to think that sluggish Italy can be left to the appetite of the credit rating agencies and at the mercy of the wolves of the money markets who have already scented blood coming from Rome, Madrid even Brussels itself.

...

My alternative interpretation is that Mrs Merkel has gone too far down the road of the fiscal transfers that she, supposedly, admonishes. As I argued above, this new package for Greece is hugely expensive on the German taxpayer and, worse still, it creates a fresh chain reaction (in the realm of speculation) that can only inflate that cost exponentially in the coming months. Rather than bringing about greater political union, and a new resolve to homogenise debt and investment, the escalating cost to the German taxpayer will undermine Berlin's political resolve to stick to the euro.