"Recapitalising banks is a step in the right direction.
The decision to give banks until June 2012 is sensible. It allows banks to sell assets rather than just go directly to public markets, which would prove difficult. The sanctions on bank dividends and bonuses should ensure this gets done. And the €106 billion in fresh capital will ensure a new minimum of 9% Tier 1 capital ratio for euro area banks. I believe that stronger banks will strive to be well above this level. The impact on growth in the short-term will be a negative as the deleveraging process continues, but a better capitalised banking system has got to be good in the long-term.
"The 50% Greek write-down is an important step forward, although I would like to see more details. The Greek write-down sets a watermark for other European countries. How does Italy look on this basis? The eye of the storm will now move to Rome and its fragile government. I don't think yields on Italian debt will fall on the back of this agreement for long.
"There have also been proposals to leverage the EFSF ‘4 or 5' times. Unless the fund has a sound equity base I think it is a heroic piece of financial alchemy. It's effectively an insurance company selling protection against its own default. You can understand why the insurance company would want to sell it but it is yet to be seen whether the Chinese would want to underwrite it.
"My overall view is that the deal isn't the game changer. Italy's 120% debt-to-GDP doesn't look any more sustainable today than yesterday. Europe is destined for a multi-year workout during where economic growth will be very restrained and equities will remain cheap.
"The path of equities will therefore require better news else where. Earnings growth in the US continues to surprise on the upside and we may be approaching a policy shift in China. The catalyst for higher equity values lies outside Europe rather than within."
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