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Greece aid package boosts stock markets Greece aid package boosts stock markets
(about 1 hour later)
  
Stock markets have continued to rise following the eurozone's comprehensive agreement designed to resolve the Greek debt crisis. Shares have continued to rise following the eurozone's agreement designed to resolve the Greek debt crisis.
UK, French and German markets gained more than 0.5% in early trading, while Japan's Nikkei closed up 1.2%. The euro also rose further against the dollar. UK and French markets gained more than 1% in morning trading, while Japan's Nikkei closed up 1.2%. The euro also rose further against the dollar.
Eurozone leaders agreed a further 109bn euros ($155bn, £96.3bn) aid package.Eurozone leaders agreed a further 109bn euros ($155bn, £96.3bn) aid package.
Private lenders will contribute to the package, which will give Greece decades more to repay its debts. Private lenders will also be asked to contribute and, as a result, the Fitch ratings agency said it would consider Greece in "restricted default".
However, relief at the deal offset any concerns about banks losing out as a result the planned debt restructuring. 'Great relief'
Relief at the deal offset any concerns about banks losing out as a result the planned debt restructuring.
Banking shares continued to rise after Thursday's sharp gains, with France's Credit Agricole and the UK's Royal Bank of Scotland and Barclays all up more than 3%.Banking shares continued to rise after Thursday's sharp gains, with France's Credit Agricole and the UK's Royal Bank of Scotland and Barclays all up more than 3%.
Bond yields, which reflect the risk investors attach to government debt, fell across the eurozone, particularly those in Greece and Portugal.Bond yields, which reflect the risk investors attach to government debt, fell across the eurozone, particularly those in Greece and Portugal.
Eurozone leaders hailed the comprehensive agreement.Eurozone leaders hailed the comprehensive agreement.
Greece's Finance Minister Evangelos Venizelos said the deal would provide "great relief for the Greek economy".
Dutch Prime Minister Mark Rutte said: "We have sent a clear signal to the markets by showing our determination to stem the crisis and turn the tide in Greece, thereby securing the future of the savings, pensions and jobs of our citizens all over Europe".Dutch Prime Minister Mark Rutte said: "We have sent a clear signal to the markets by showing our determination to stem the crisis and turn the tide in Greece, thereby securing the future of the savings, pensions and jobs of our citizens all over Europe".
Debt relief Package measures
The eurozone agreement is a comprehensive package designed not only to resolve Greece's debt crisis but to prevent contagion to other European economies, thereby shoring up the euro in the process.The eurozone agreement is a comprehensive package designed not only to resolve Greece's debt crisis but to prevent contagion to other European economies, thereby shoring up the euro in the process.
The 109bn-euro package includes: The package includes:
  • Various options to extend Greece's repayment terms and reduce the amount it repays
  • Voluntary private sector participation in these options, so that banks share taxpayers' burden
  • Doubling the length of repayment terms for the Irish Republic and Portugal, both of which have received financial assistance previously
  • Additional powers granted to the European Financial Stability Facility to buy up bonds and to make credit available to countries such as Spain and Italy that are not at immediate risk of insolvency.
  • 109bn euros in new loans to Greece
  • Various options to extend Greece's repayment terms and reduce the amount it repays on existing loans
    •
  • Voluntary private sector participation in these options, so that banks share taxpayers' burden
  • Doubling the length of repayment terms for the Irish Republic and Portugal, both of which have received financial assistance previously
  • Additional powers granted to the European Financial Stability Facility to buy up bonds and to make credit available to countries such as Spain and Italy that are not at immediate risk of insolvency.
The Institute of International Finance (IIF) - a global trade body representing big banks and other major lenders - said the planned debt restructuring would target participation by 90% of Greece's private sector lenders.The Institute of International Finance (IIF) - a global trade body representing big banks and other major lenders - said the planned debt restructuring would target participation by 90% of Greece's private sector lenders.
French President Nicolas Sarkozy said private lenders would contribute a total of 135bn euros of financing to Greece.French President Nicolas Sarkozy said private lenders would contribute a total of 135bn euros of financing to Greece.
This is expected to provide some 50bn euros of debt relief to Greece.This is expected to provide some 50bn euros of debt relief to Greece.
Three of the four options offered to lenders to swap or relend existing debts would extend Greece's repayment terms by 30 years, while the fourth would do so by 15 years.Three of the four options offered to lenders to swap or relend existing debts would extend Greece's repayment terms by 30 years, while the fourth would do so by 15 years.
They all offer a much lower interest rate than Greece's current 15%-25% cost of borrowing in financial markets.They all offer a much lower interest rate than Greece's current 15%-25% cost of borrowing in financial markets.
Two of the options would also involve "haircuts" - reducing the amount of debt Greece has to repay.Two of the options would also involve "haircuts" - reducing the amount of debt Greece has to repay.
The terms of the deal imply a loss to Greece's lenders equivalent to 21% of the market value of their debts, said the IIF.The terms of the deal imply a loss to Greece's lenders equivalent to 21% of the market value of their debts, said the IIF.
'Right signal''Right signal'
Whether the international credit rating agencies declare such a restructuring a default, as they have previously threatened to do, remains unclear. Fitch ratings agency said it would consider Greece to have defaulted on its debts once old bonds had been swapped for new bonds.
Other agencies have previously threatened to do the same.
Observers suggest they are under considerable political pressure not to declare a default, as if they do it could severely undermine confidence in both the eurozone economy and its banks.Observers suggest they are under considerable political pressure not to declare a default, as if they do it could severely undermine confidence in both the eurozone economy and its banks.
The ECB and France had been particularly opposed to a restructuring and involving the private sector, but it was ultimately insisted on by Germany.The ECB and France had been particularly opposed to a restructuring and involving the private sector, but it was ultimately insisted on by Germany.
German Chancellor Angela Merkel said: "I strongly welcome the voluntary contribution from the banks. I believe that this is the right signal coming at a difficult time".German Chancellor Angela Merkel said: "I strongly welcome the voluntary contribution from the banks. I believe that this is the right signal coming at a difficult time".
Mr Sarkozy played down the significance of the banks' participation in the aid package.Mr Sarkozy played down the significance of the banks' participation in the aid package.
"If the rating agencies are using the word you just used (default), it is not part of my vocabulary. Greece will pay its debt," he told reporters."If the rating agencies are using the word you just used (default), it is not part of my vocabulary. Greece will pay its debt," he told reporters.
European Commission President Jose Manuel Barroso indicated plans to rein in the power of the agencies.European Commission President Jose Manuel Barroso indicated plans to rein in the power of the agencies.
"We... endorsed the plan of reducing over reliance on external credit ratings," he said, adding that policymakers would come forward in the autumn "with further proposals"."We... endorsed the plan of reducing over reliance on external credit ratings," he said, adding that policymakers would come forward in the autumn "with further proposals".