Last night's announcement of an agreement between Euro-zone leaders and EU banks on the restructuring of Greek debt, recapitalisation of banks, leverage of the EFSF and a move toward common economic governance within the Euro-zone was the most credible political response to date to the sovereign debt crisis, says Barry Norris, partner, Argonaut Capiral Partners…

Whilst markets are relieved in the existence of a policy response, details of key parts of the plan such as the EFSF are vague and may not stand scrutiny. It is doubtful whether even after a 50% haircut for private creditors, the level of Greek debt is sustainable.

There also looks to be significant wiggle-room for banks to avoid the necessary degree of recapitalisation. New Italian and Spanish governments are needed to undertake credible economic reform and in Rome urgently turn a budget deficit into a surplus. Ultimately, the single currency needs a Euro-zone political institution with executive power over fiscal policy. All of this seems like nit-picking today, but in the months ahead, markets will focus on these key issues.
 
EU leaders have bought time. Now the really hard work starts.