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2010-05-10 12:24:41
EU finance ministers have agreed on emergency measures worth 500bn euros ( 430bn) to prevent the Greek debt crisis from affecting other countries.
The 16 members of the single currency bloc will have access to 440bn euros of loan guarantees and 60bn euros of emergency European Commission funding.
The International Monetary Fund (IMF) will also contribute up to 250bn euros.
Global stock markets surged, with London opening 3.7% up and the euro recovering after last week's tumble.
"The eurozone is certainly regaining confidence. Our fundamentals are certainly good," EU Commission President Jose Manuel Barroso said.
There had been fears that without the measures, the euro might have come under pressure on markets as investors grew concerned about financially-troubled states such as Portugal and Spain.
Many would say the crisis has been postponed rather than solved
Robert Peston, BBC business editor
The euro strengthened in early trading, surging above $1.30, after hitting a 14-month low last week.
In London, the FTSE 100 share index was trading up 190.89 points at 5,314.
This followed a rise in Asian stock markets, with the Japan's Nikkei 225 index up 1.3% and Hong Kong's Hang Seng index climbing 0.8%.
On Friday, eurozone leaders approved an 110bn-euro loan package to Greece, which will be backed by the EU and IMF.
"The IMF will play its part, in the interests of the international community, in addressing the current challenges," said IMF chief Dominique Strauss-Kahn in a statement.
Marathon talks
Speaking early on Monday after 11 hours of talks, Spanish Finance Minister Elena Salgado announced that an agreement had been reached on a package to defend the euro and eurozone economies.
ANALYSIS
By Jonny Dymond BBC News, Brussels
What was meant to be a two-hour meeting of finance ministers turned into an 11-hour negotiation.
The sums pledged are huge - enough to support the borrowing of several eurozone countries for a couple of years. And central banks around the world have launched what look like co-ordinated actions to assist financial stability.
So far, market reaction has been positive, but there will be demands for more detail about the bulk of the package - how the money will be raised, how quickly it might be made available and under what conditions it will be disbursed.
The UK has a very limited exposure to this package, and has not participated in the bulk of the deal.
Under the aid plan, the European Commission would make 60bn euros available to support member states experiencing "difficulties caused by exceptional circumstances beyond their control", she said.
Ms Salgado said eurozone member states would "complement such resources through a Special Purpose Vehicle (SPV)", known as the European Financial Stabilisation Mechanism and worth 440bn euros, which they would guarantee on a pro-rota basis over a period of three years.
The IMF will contribute an additional sum of at least half of the EU's contribution to the SPV - a total of 250bn euros.
"It shows through this decision that we are placing considerable sums in the interest of stability in Europe.
"Our conclusions also reiterate yet again the need for progress to be made on regulating the financial system, on oversight and the supervision of the financial system, in particular derivatives and the role of rating agencies," she said.
The European Central Bank (ECB) also announced that it would buy eurozone government and private debt "to ensure depth and liquidity in those market segments which are dysfunctional".
In a statement, the bank said the scope of the purchases was yet to be determined, but that they would be offset by liquidity-absorbing operations so as not to affect the stance of monetary policy.
EU laws prevent the ECB from buying bonds directly from governments in the way the US Federal Reserve and Bank of England have done. It can get round the restriction by buying debt second-hand from banks.
"The fiscal efforts of the EU member states, the financial assistance by the commission and by the member states, actions taken today by the ECB prove we shall defend the euro whatever it takes," said Mr Rehn.
The Federal Reserve later said it would re-open currency swap facilities with other major central banks "to help improve liquidity conditions in US dollar funding markets and to prevent the spread of strains to other markets and financial centres".
In an interview with Russian media, US President Barack Obama said: "I am very concerned about what's happening in Europe. But I think it is an issue that the Europeans recognise is very serious."
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8671632.stm
Published: 2010/05/10 08:54:58 GMT
EU creates $1 trillion package to save euro
BRUSSELS European foreign ministers and EU leaders are voicing optimism that the $1 trillion plan to prevent its debt crisis from undermining the euro and derailing the global economy was working as hoped.
EU foreign affairs chief Catherine Ashton says the plan is good both for Europe and the world economy.
Stock and bond markets in Asia and Europe are rising on the news of the EU move.
Under the three-year plan adopted early Monday, countries from the 16-nation eurozone would promise backing worth euro440 billion for troubled governments. The IMF would contribute about additional euro250 billion and the EU euro60 billion.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
BERLIN (AP) The German government will move swiftly to approve its share of the new rescue package for the eurozone, Chancellor Angela Merkel said Monday, calling the plan a necessary measure to protect her compatriots' money.
Merkel said her Cabinet will pass the package of loan guarantees in a special meeting Tuesday and it will then go to parliament for "quick but thorough" consideration.
Under the three-year plan, the European Commission the EU's governing body will make euro60 billion ($75 billion) available while countries from the 16-nation eurozone would promise backing for euro440 billion ($570 billion).
The IMF would contribute an additional sum; and the European Central Bank said it is ready to buy debt from the eurozone.
"We are convinced that everything was done to be able to secure the stability of our currency," Merkel said at a brief early morning news conference.
"I can say this to our citizens: we are protecting the money of people in Germany," she said. "This package is necessary and serves to guarantee and secure the future of the euro."
Germany's share of the loan guarantees is expected to be some euro123 billion.
Merkel stressed that budget consolidation in the 16 eurozone countries will have "extraordinary importance."
"Access to the guarantees we are setting up will be linked to consolidation programs being provided to the IMF and the European Union, which will then be regularly reviewed," Merkel stressed.
Rescuing Greece from its own financial irresponsibility was unpopular in Germany. The government on Friday pushed through parliament Germany's share of a separate rescue package for Greece.
Merkel said that "we don't need to approve this bill within two or three days but can complete deliberations with a little more time" because the European Commission's initial euro60 billion contribution doesn't require national approval.
"The eurozone's member states showed yesterday that we have a common political will to do everything for the stability of our common currency," she said. "This is a determined and united message to those who think that they can weaken Europe."