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Leaders Hail $1 Trillion Plan To Stabilize Euro


The $1 trillion package includes 440 billion euros in guarantees from eurozone states, plus 60 billion euros through the European Commission.

The $1 trillion package includes 440 billion euros in guarantees from eurozone states, plus 60 billion euros through the European Commission.

European leaders are voicing optimism that a plan to prevent a debt crisis from undermining the euro currency is working as hoped.

Stock and bond markets in Asia and Europe were rising in early trading today on news of the plan agreed overnight.

The size of the euro stabilization package -- at up to 750 billion euros ($1 trillion) -- took markets by surprise.

The euro rebounded on foreign exchange markets above $1.30, from $1.27 late on May 7, and today's rise in share prices helped cancel out heavy losses run up last week amid fears that the debt crisis could undercut Europe's economic recovery.

EU foreign-affairs chief Catherine Ashton says the plan is good for both Europe and the global economy.

International Monetary Fund (IMF) head Dominique Strauss-Kahn hailed it as a "big step forward," and in Berlin, German Chancellor Angela Merkel described the move as a necessary step to protect the euro.

"This package is meant to strengthen and protect our common currency. It is unprecedented in the history of the euro and the European Union, and we are protecting our currency in an extraordinary situation," Merkel said.

"And to our citizens, let me put it this way: we are protecting the money of the people in Germany."

Saving The Euro

After 11 hours of talks that went into the early hours of this morning, EU finance ministers agreed upon a much bigger financial contribution than any previous deal to calm the financial markets and fears that the Greek debt crisis will spread to other eurozone members.

The package announced early today in Brussels will be a mix of loans and guarantees with the backing of the IMF.

Under the three-year plan, countries from the 16-member eurozone would promise backing worth 440 billion euros to governments that are facing potential debt crises -- Greece, Spain, Italy, Ireland, and Portugal.

The IMF would contribute some 250 billion euros, while the European Commission itself would provide another 60 billion in loans.

Olli Rehn, the European commissioner for economic and monetary affairs, said the current problems are a systemic challenge to financial stability in the eurozone. He said the threat is not just against one member state -- but a threat to the stability of the entire eurozone, as well as the whole of the European Union.

"All in all, the fiscal efforts of EU member states, the financial assistance by the commission and the member states, and the actions taken today by the European Central Bank proves we shall defend the euro -- whatever it takes," Rehn said.

Central Banks Chip In

But the rescue comes with conditions attached.

Germany's Merkel said eurozone countries would be required to speed up their efforts to tackle their fiscal problems.

"The access to the guarantees, which we are setting up for those who need the protection of the euro, will be tied to consolidation programs presented to the IMF and the European Union. They will be regularly checked," Merkel said.

"All eurozone member countries agree to speed up their budget consolidation."

Major central banks were also involved in the coordinated effort.

The U.S. Federal Reserve said it would swap dollars for other currencies with several central banks to ensure banks have the dollars they need.

In an unprecedented move, the European Central Bank said it would buy eurozone government debt to support markets -- abandoning its previous resistance to full-scale bond purchases.

Today, two eurozone central banks -- Germany's and Finland's -- confirmed they had begun the buying spree.

compiled from agency reports
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