Leaders at the European summit made some important progress in dealing with the debt crisis. The two big steps were to get the banks to take a loss on their holdings of Greek debt. They will voluntarily write down 50% of the debt that they hold. Since it was "voluntary" it does not trigger a default on the debt and trigger the use of credit default swaps to cover their loss. This was a big victory for Germany. French banks are more exposed to Greek debt than German banks and its government was concerned about the potential impact on its banks. The banks will get some government assistance in building up their capital base so that they can absorb the loss.
A decisions was also reached that would enable Europe to deal with potential problems in Italy. A fund to guarantee a portion of Italy's debt was increased to restore investor confidence in the safety of Italian debt. Without this support Italy would face higher interest rates when it issues new debt to cover debt that matures. That would have increased Italy's debt to GDP ratio beyond legal limits imposed by the eurozone treaty.
Stock markets in Europe and elsewhere responded positively to the news.
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