EUROPEAN leaders such as the European Commission President Jose Manuel Barroso are congratulating themselves on finally delivering a credible package to resolve the sovereign debt crisis.

In part, this is deserved. The initial verdict of the stock markets has been positive, largely because eurozone leaders have finally put some real numbers on the table. Private investors in Greek debt will have to accept a 50% “haircut” or write down on their bonds. That’s a big loss, and it will damage the balance sheets of banks in Britain, France and Germany who hold Greek debt. To address this, the summit has agreed a 106bn euro package of bank recapitalisation.

Eurozone leaders have also enlarged the ‘firepower’ of the European Financial Stability Facility (EFSF), the eurozone bail out fund, from 250 billion euros, to 1 trillion euros through leverage, or financial engineering. Provided this doesn’t turn out to be the kind of financial jiggery-pokery that helped cause the 2008 financial crash, this should allow the EFSF to immunise countries like Spain and Italy against sovereign debt contagion – at least for the next couple of years. The immediate result of the package will be to reduce Greece’s sovereign debt to “only” 120% of GDP by 2020 – but at least that gives the country a fighting chance of getting its economy back on an even keel. Whether the Greeks will welcome the presence of “inspectors” from Brussels camping out in their treasury to ensure austerity measures are implemented is another matter.

So far, so good, however. The problem is that even 1 trillion euros will not be enough to save the indebted eurozone states if the European economy as a whole fails to grow. Without growth, countries like Italy, Spain – and let’s not forget Britain – will have little chance of balancing their books because they will lack tax revenues to pay the interest on their debts. If the creditor states, like Germany and France, fail to boost their economies over the next couple of years, then Europe will be back to square one and debt contagion will resume. Indeed, if there is not a return to growth across the European Union, the eurozone will almost certainly fall apart as countries will seek to reduce their debts by devaluation, protectionism or outright default. Assuming growth is resumed, this new eurozone arrangement poses a challenge to Britain. The 17 countries in the single currency seem resolved to move towards a ‘fiscal union’ with a central budgetary authority, integration of taxation and a new decision-making structure including a new eurozone “super-commissioner”. If this represents a move towards a two-tier Europe, Britain risks being left in the second tier, locked out of decision-making.

However, this is not the moment to indulge in pointless pessimism. At last Europe’s politicians have risen to the occasion and managed to show some leadership and a degree of resolve. Let us hope that the countries of the EU now devote their energies to ensuring that there is no double-dip recession by promoting economic activity. It is not enough to lecture countries like Greece over their early retirement regimes – the leading economies of Europe must now make a co-ordinated bid for growth. There is plenty to do: developing renewable energy, improving infrastructure, extending fast broadband and building fast rail. What the people of Europe will not excuse is a lapse back into indolent complacency by Europe’s political elite. At the 11h hour they finally came up with a plan – but the hard work of implementing it has not yet begun.