Europe's 'big bazooka'

French President Nicolas Sarkozy said a Greek default had been avoided

The deal - when it emerged from a long Brussels night - may not have been the big bazooka that some had been calling for but it exceeded many expectations.

French President Nicolas Sarkozy said it was "ambitious" and "credible". Its ambition is not in doubt but many crucial details are missing and the test of this deal lies in the weeks ahead.

Greece proved the hardest part. International banks will be asked to take losses of up to 50%. It is a voluntary cut and we don't know whether all investors will fall into line - despite some sweeteners having been thrown into the package. The deal will result in some big losses for Greek banks and some of them may have to be nationalised on a temporary basis.

Europe's banks - exposed to these losses - will have to find more capital. It is impossible to calculate how much without knowing how many banks agree to the "haircut".

The ballpark figure for strengthening the banks will be around 100bn euros. Banks will be expected to raise the money themselves. If that proves impossible then governments will have to step in despite the unpopularity of being seen to further bail out banks. Only as a last resort will banks be able to draw on the EFSF - the zone's main bailout fund.

Greek Prime Minister George Papandreou said it put Greek debt on a sustainable basis. Certainly it will take a chunk out of the Greek debt mountain that currently stands at around 360bn euros.

But even by the end of the decade its debt as a ratio of GDP will be 120% - the same as Italy's now. That has to be an optimistic projection. Greece has been given a chance to escape its debt trap but long years of austerity lie ahead and its economy is still shrinking. Prime Minister Papandreou said "let's hope a new and better dawn emerges".

'Nothing secret'

The EU's main bail-out fund - the European Financial Stability Facility - has been boosted to around a trillion euros.

It currently stands at 440bn euros although the fund has already been raided.

The new figure will be lower than some people think necessary to protect big economies like Italy and Spain. The test will be whether it lowers their borrowing costs. And the true size of the fund depends on many unknowns including investments from among others the Chinese.

The President of the European Council, Herman Van Rompuy, said of using the fund to raise more money: "There is nothing secret in all this, it is not easy to explain but we are going to [do] more with our available money, it is not that spectacular. Banks have been doing this for centuries, it has been their core business, with certain limits."

With this deal some time has been bought. Some of the crucial details of how, for instance, the rescue fund will work, will not be hammered out until November.

Hanging over all of this is the question of growth. All of these calculations, commitments and expressions of determination can be dismissed if Europe's weakest countries do not return to growth.