In the flush of their 3 a.m. announcement of a breakthrough in marathon negotiations, European officials made claims for the program that ranged from the grand to the unverifiable.
Greek Prime Minister George Papandreou said the expected 50 percent cut in what the country owes to banks and other private lenders had lifted “a burden from the past” and will give his country financial breathing room. French President Nicolas Sarkozy said the program would provide $1.4 trillion to prop up Spanish and Italian bonds, though details on the mechanics of that were scant.
Still, the plan seemed to begin untying the knots at the center of the euro region’s troubles: Banks will get fresh capital from private sources or taxpayers; weakened governments will have more help to hold down their borrowing costs; Greece will get outright debt relief and more time to overhaul its economy.
The region also committed
itself to reigniting economic growth, considered critical for the plan to work.
The United States has been pushing for the region to act more forcefully to resolve the debt crisis. The Obama administration had urged some more dramatic and fast-acting fixes that European officials rejected.
On Thursday, President Obama said the new plan provides “a critical foundation for a comprehensive solution to the euro-zone crisis.” But, after watching the problems of Greece fester into a global threat, Obama also emphasized that follow-through is crucial. “We look forward to the full development and rapid implementation” of the bailout plan, he said.
Major European exchanges jumped anywhere from 3 to 6 percent Thursday; stocks of banks in France and Germany soared close to 20 percent in some cases after a summer in which investors shunned European financial companies. U.S. markets also surged Thursday — the Standard & Poor’s 500-stock index advanced 3.4 percent, and the Dow Jones industrial average closed the trading session up 2.9 percent.
Asian markets also shot higher in early Friday trading. Japan’s Nikkei 225 index, up 1.4 percent at midday, rose above the 9,000 mark for the first time in eight weeks.
“Even if it probably was not the final word on the crisis, it is again another important step in the right direction,” analysts from ING said in a research note that conveyed a widely held feeling that the program was constructive but will need time before its impact is clear.
The headline feature — the 50 percent cut in the face value of roughly $240 billion in Greek bonds held by banks, pension funds and other investors — must still be finalized in follow-up talks to take place by year’s end.
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