The euro traded higher on Friday after European Union leaders reached a groundbreaking agreement for a last-ditch bailout package for deficit-strapped Greece and other troubled EU economies.
European Union leaders saluted Friday the bailout agreement they had struck the night before after weeks of fractious debate. The deal sets up a sort of last-ditch rescue mechanism for strapped EU economies. It combines bilateral loans from the 16 countries using the euro currency with cash from the International Monetary Fund.
It would only be triggered if Greece or troubled eurozone members could not borrow money at reasonable market rates. Any loan would have to be approved by all eurozone members.
At a press conference in Brussels, President Nicolas Sarkozy of France - which brokered the deal with Germany - saluted the agreement as a success.
Mr. Sarkozy said the bailout deal was clearly a preventative one - the objective was not to use it. But he said it would send a positive signal to financial markets so Greece could borrow at reasonable interest rates while being able to carry out its tough austerity measures. He said two-thirds of any loan would come from eurozone nations, with the IMF chipping in the last third.
Pressure had been high for EU leaders to come up with a deal during their two-day summit in Brussels. Greece has been hit by strikes and protests as it tries to cut spending and trim its skyrocketing public debt and deficit. If Athens had to pay very high rates to borrow money, it would make it even more difficult to get its economic house in order.
But Germany, for one, had balked at bailing out Greece. Other players have been skeptical about bringing in the IMF, fearing it would undermine the eurozone's ability to deal with its own problems. But on Friday, German Chancellor Angela Merkel hailed the deal as a signal of the EU's ability to work together. And European Central Bank chief Jean-Claude Trichet denied that including the IMF undermined the eurozone's autonomy.
"I consider it a workable solution that preserves for us what is decisive - the responsibility of the governments of the euro areas," he said. They have immense responsibilities according to the treaty, according to the stability and growth pact. We consider these responsibilities are preserved with this solution."
The EU has also tasked its chief, Herman Van Rompuy, to draw up a plan by the year's end to toughen economic oversight of member states and to establish prevention mechanisms to avoid future crises.
