BRUSSELS, March 12 (Reuters) - Euro zone leaders agreed early on Saturday on a series of measures to bolster the single currency area’s financial safety nets and help distressed countries return to sustainable public finances.
Below is the text of the agreement: CONCLUSIONS OF THE HEADS OF STATE OR GOVERNMENT OF THE EURO AREA OF 11 MARCH 2011
The Heads of State or Government of the Euro area adopted the following conclusions:
1. The Pact for the Euro which establishes a stronger economic policy coordination for competitiveness and convergence (attached) has been endorsed. This Pact will be presented to the European Council of 24/25 March 2011 with a view for non-euro area Member States to indicate whether they intend to participate in the Pact. At the same time Euro area Member States shall indicate first measures they pledge to implement under the Pact for the next year.
2. The Heads of State or Government of the Euro area assessed progress made since the European Council of 4 February 2011 on the comprehensive response to the crisis, with a view to completing this package for the 24/25 March European Council.
3. They welcome the progress made in the implementation of the on-going IMF/EU programs in Greece and Ireland, and the strong commitments by
- Greece to rigorously continue structural reforms, increase capacity building for their implementation, fully and speedily complete the 50 billion euro privatization and real estate development programme it has announced and to introduce a strict and stable fiscal framework with the strongest possible legal basis to be decided by the Greek government;
- Ireland to introduce a strict and stable fiscal framework, with the strongest possible legal basis, and to stick to fiscal targets through expenditures decreases and revenue increases as foreseen in the programme.
4. Following their statement of 4 February concerning the assessment by the Commission, in liaison with the ECB, of the implementation of measures taken to strengthen fiscal positions and growth prospects, they welcome progress made in a number of countries. In particular, Heads of State or Government, the President of the Commission and the President of the ECB welcome and support the package of far-reaching measures announced today by Portugal concerning fiscal, financial and structural reforms.
5. The Heads of State or Government of the Euro area invite Ministers of Finances to complete their work on the ESM and the EFSF in time for the European Council of 24/25 March 2011. This work should strictly adhere to and fully implement the European Council conclusions of December 2010 and the Eurogroup statement of 28 November 2010, which define the key features of the ESM (see annex II). The following conclusions have been drawn from the discussion:
* Financing capacity
The ESM will have an overall effective lending capacity of 500 billion euros. During the transition from EFSF to ESM, the consolidated lending capacity will not exceed this amount. The ESM effective lending capacity will be ensured by establishing the appropriate mix between paid-in capital, callable capital and guarantees. A timetable for the gradual paying in of capital will be established, fully respecting national parliamentary procedures.
Until the entry into force of the ESM, the agreed lending capacity of 440 billions euros of the EFSF will be made fully effective.
The Heads of State or Government recall that the ESM will provide financial assistance when requested by a Euro area member and when such intervention is deemed indispensable to safeguard the stability of the Euro area as a whole. Any decision to that effect will be taken by unanimity on the basis of a debt sustainability analysis of the Member State concerned conducted by the Commission and the IMF, in liaison with the ECB. Financial assistance will be subject to strict conditionality under a macroeconomic adjustment programme.
Financial assistance from the ESM and EFSF will take the form of loans. However, to maximize the cost efficiency of their support, the ESM and the EFSF may also, as an exception, intervene in the debt primary market in the context of a programme with strict conditionality.
* Financial conditions
Pricing of the EFSF should be lowered to better take into account debt sustainability of the recipient countries, while remaining above the funding costs of the facility, with an adequate mark up for risk, and in line with the IMF pricing principles. The same principles will apply to the ESM. Against this background and in view of the commitments undertaken by Greece in the context of its adjustment programme, the interest rate on its loans will be adjusted by 100 basis points. Moreover, the maturity for all the programme loans to Greece will be increased to 7.5 years, in line with the IMF.
Finance Ministers will specify modalities of implementation of these decisions.
6. All Member States will ensure that concrete plans, compliant with EU State aid rules, are in place to deal with any bank that demonstrates vulnerabilities in the stress tests that will be completed by the summer.
7. The Heads of State or Government call on Finance Ministers to finalize their work on the Commission six legislative proposals on economic governance and to reach, before the end of March, a general approach ensuring full implementation of the recommendations of the Task Force. In this context, they agree that the setting up of a numerical benchmark of 1/20 for debt reduction, to be assessed taking into account all relevant factors, as outlined in the Commission proposal, should be fully part of this package. They all support the adoption of the draft directive on national fiscal framework. In deciding on the steps in the SGP the Council is expected to, as a rule, follow the recommendations of the Commission or explain its position in writing.
8. The Heads of State or Government agree that the introduction of a financial transaction tax should be explored and developed further at the Euro area, EU and international levels.
Reporting by Jan Strupczewski, editing by xxxxx
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