Europe seals deal to contain debt crisis
We said it was our last word, our last offer -
Merkel:
BRUSSELS: Europe sealed a last-ditch deal Thursday to fix its
festering debt crisis, shoring up its bailout fund, pledging new funds
for Greece and pushing banks to share the pain at a summit vital to the
health of the global economy.
After days of talks and two successive summits that dragged on for
almost 10 hours as markets and world leaders remained on tenterhooks, EU
president Herman Van Rompuy emerged in the wee hours saying: “We took
important decisions.”
Asian stock markets rallied and the euro rose on the announcement
with Tokyo up 1.15 percent and Hong Kong rising 1.74 percent in midday
trade. The euro was higher, buying $1.3958 up somewhat from $1.3908 late
Wednesday in New York.
As Asia shares firmed, IMF chief Christine Lagarde welcomed
“substantial progress”, but European Central Bank chief Jean-Claude
Trichet warned that “all of this now requires a lot of work and a lot of
quick work.”
The last and perhaps toughest chapter in the four-point plan was a
deal between eurozone leaders and the Institute of International Finance
banking lobby to force private investors to take a 50 percent loss on
Greece’s debt.
French President Nicolas Sarkozy and German Chancellor Angela Merkel
broke off from the summit to save the day and cut a deal with the head
of the banking lobby, Charles Dallara.
“We said it was our last word, our last offer,” said Merkel of
threats to allow Greece to default failing agreement.
“We have done what needed doing,” she said.
The banks in past weeks had raised their offer to 40 percent but
governments insisted on a 50-percent “haircut”. The deal aims to slice a
whopping 100 billion euros off the 350-billion-euro debt pile hampering
Greece, which also won new pledges of a 100-billion-euro loan over the
next three years.
Prime Minister George Papandreou, hailed “a new era, a new chapter”
for Greece, whose debt woes kicked off a two-year crisis that
successively hit Ireland and Portugal before threatening to spill over
to the euro area’s third and fourth economies, Italy and Spain.
To address that danger, eurozone leaders agreed to boost their debt
rescue fund to one trillion euros.
The firepower of the European Financial Stability Facility (EFSF) is
to be leveraged up between four- and five-fold using clever financial
footwork to avoid governments increasing guarantees.
With the world on tenterhooks, emerging powers China and Russia waded
in with offers to help Europe safeguard the global economy by
contributing to the fund.
The development came as global powers, from the United States to
Japan and China, pressed European leaders to come up with a lasting
solution to the debt crisis before a G20 summit in France on November 3
and 4. AFP |
