Monthly Briefing on the World Economic Situation and Prospects, No. 37

In late October, European leaders held a marathon negotiating session and finally agreed on a set of measures intended to solve?the?ever-simmering debt crisis. The measures include a 50 per cent write-down of Greek debt held by the private sector, based on a voluntary arrangement between the Greek Government and concerned parties. With this in place and, given the envisaged public sector?reforms, the Greek debt-to-GDP ratio is targeted to reach 120 per cent by 2020. European leaders also agreed to recapitalize banks?in the region to the tune of ?106 billion. Finally, two options to leverage the resources of the European Financial Stability Facility?(EFSF) were announced: provide credit insurance for new debt issued by EU member States; and enlarge the funding arrangements?of the EFSF by combining resources from public and private financial institutions, as well as investors.?