Eurozone in emergency debt deal

26 October 2011 Last updated at 22:52 ET

Germany and France have been driving the rescue efforts for the eurozone

Eurozone leaders have reached a “three-pronged” agreement they say is vital to resolving the region’s debt crisis.

As part of the deal, banks have agreed to take a 50% loss on Greek debt.

That has removed a major obstacle in European efforts to stabilise the problem.

The announcement helped lift the euro as investors were more optimistic about the outlook for the region’s growth and single currency.

“The result will relieve the whole world that was expecting a decision that was strong from the eurozone,” French President Nicolas Sarkozy said at a press conference in Brussels.

Fears about the state of the eurozone’s finances and the threat of a break up of the single European currency have been stalking markets for months.

Critics have accused policymakers of not doing enough to resolve the issues, contributing further to the problems and fuelling uncertainty.

In an effort to reassure markets, eurozone leaders have been trying to hammer out a deal what would help Greece put its national finances in order and underpin other European economies such as Italy.

As part of Thursday’s deal, the eurozone leaders have also called on the region’s banks to increase the amount of money they hold on their books.

At the same time, they are also planning to boost the power of a region-wide rescue fund.

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