World leaders, markets laud hard-won euro deal

BRUSSELS, Oct 28, 2011 (AFP) - Markets soared on a landmark deal aimed at stemming the eurozone debt crisis, as questions about the details of the plan were swept aside by a wave of relief, and praise from world leaders. AFP - Greek Finance minister Evangelos Venizelos arrives for a press conference at his ministry in Athens on October 27, 2011, a day after European leaders at an emergency summit called on banks to raise their core capital ratios, a key measure of stability, to nine percent.

BRUSSELS, Oct 28, 2011 (AFP) - Markets soared on a landmark deal aimed at stemming the eurozone debt crisis, as questions about the details of the plan were swept aside by a wave of relief, and praise from world leaders.

AFP - Greek Finance minister Evangelos Venizelos arrives for a press conference at his ministry in Athens on October 27, 2011, a day after European leaders at an emergency summit called on banks to raise their core capital ratios, a key measure of stability, to nine percent.
AFP - Greek Finance minister Evangelos Venizelos arrives for a press conference at his ministry in Athens on October 27, 2011, a day after European leaders at an emergency summit called on banks to raise their core capital ratios, a key measure of stability, to nine percent.

President Barack Obama on Thursday led international applause for the deal reached after marathon EU talks in Brussels.

He welcomed what he called "important decisions" that would "lay a critical foundation for a comprehensive solution to the eurozone crisis."

With nothing less than the future of the eurozone and the health of the global economy at stake, investors also cheered the end of months of uncertainty and perceived prevarication.

The main indices in the West rose from between 2.8 percent to more than 6.0 percent on the news. Asian bourses extended the rally Friday, as Tokyo gained 1.36 percent by the break and Hong Kong surged 2.35 percent on opening.

But Obama's comments, after months of pressing the European Union to protect the euro and prevent the crisis dragging the world back into recession, were tinged with a sense of a job not yet finished.

"We look forward to the full development and rapid implementation of their plan," he noted.

The broad agreement was designed to address the continent's three-pronged crisis: avoiding a Greek default, backstopping other countries struggling with debt and improving the war chests of at-risk banks.

German Chancellor Angela Merkel and French President Nicolas Sarkozy were keen to herald the agreement, which resuscitated the idea that a Franco-German motor can still drive Europe when needed.

"We have done what needed doing," said German Chancellor Angela Merkel.

Sarkozy said the agreement had saved Europe and the whole world from disaster.

"We had to face up to all this... If there had not been an agreement last night, it was not just Europe that would have sunk into catastrophe, it was the whole world," he said in a televised interview.

In Athens, Prime Minister George Papandreou said Greece, the epicenter of the crisis, had won a battle "of huge importance for the country" which would now aim to become productive once again.

But the deal left some key questions unanswered about the long-term coherence of the eurozone -- particularly how budget discipline could be maintained in the future across the 17 countries of the disparate monetary union.

It also remained to be seen whether bank writedowns of 50 percent on Greek debt would trigger a wave of insurance claims, spreading damage through the financial system.

Some commentators doubted whether the deal will deliver growth, the key to ultimately getting past the region's debt problems.

"The plans... look more like a peashooter than the 'bazooka' previously promised to tackle the region's problems," skeptical Capital Economics analysts told clients.

"We have not altered our view that the crisis will deepen over the coming quarters, ultimately resulting in some form of break-up of the currency union."

With the global economy stalling, Europe had come under intense pressure to put its house in order to save Italy and Spain from following Greece, Ireland and Portugal into needing huge bailouts from the EU and International Monetary Fund.

The plan includes quadrupling the firepower of the European Financial Stability Facility, the EU emergency rescue fund, to one trillion euros; a new 100 billion euro bailout for Greece; a deal forcing banks to take a 50 percent loss on their holdings of Greek debt, to lessen Athens' financing burden; and a push for banks to strengthen their capital base by a collective 100 billion euros.

The Financial Times said Friday that China is ready to pump as much as $100 billion (70.5 billion euros) into the bailout fund if European leaders can convince it the investment is safe.

Brazil and Russia have indicated a readiness to invest, but China has made no official commitment.

The head of the eurozone bailout fund Klaus Regling is visiting Beijing on Friday, as he seeks to persude China and other top emerging economies to come to Europe's rescue.

Sarkozy and Merkel broke off from the summit talks to personally cut the deal with the head of the banking lobby IIF, Charles Dallara.

"We said it was our last word, our last offer," said Merkel of threats to allow Greece to default if the banks failed to accept the terms offered.

Brazilian Finance Minister Guido Mantega gave the deal a cautious welcome.

"The measures are good," Mantegna said in Brasilia. "It is an important step."

But he added: "What worries me is the time frame, if we have the necessary time for the plan's implementation if there is a deterioration in the world economy.

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