Markets give tentative thumbs-up to Greek deal

Europe’s main stockmarkets were firm at opening on Friday after the eurozone debt deal for Greece. London’s FTSE was up 0.49 per cent while the French CAC 40 gained 0.95 per cent.. 

Reuters/Thierry Roge

Fears that a fresh financial crisis could tear through world economies have pressured markets in recent weeks as the likes of Italy and Spain have seen their borrowing costs soar over debt contagion concerns.

Greek Prime Minister George Papandreou said the new eurozone bailout of Greece will enable the country to reduce its debt mountain by around 26 billion euros by the end of 2014.

Greece has 350 billion euros in total public debt.

European leaders agreed at an emergency meeting in Brussels on Thursday on a 109 billion bailout for Athens

Lending terms to Ireland and Portugal are also to be eased and the 440 billion euro European financial stabilisation fund (EFSF) will be allowed to buy bonds in the secondary market to fight contagion risks.

The private sector's ‘contribution’ would roughly amount to a further 50 billion euros including a bond buy-back programme.

According to economists, the rescue's ‘key development’ is that the European Central Bank can still accept Greek bonds as collateral for refinancing operations even if ratings agencies deem Greece to be in "selective default.

The new bailout for Greece comes after the European Union and IMF's 110 billion euro bailout last year proved insufficient, with the financial markets tightening the screws on Athens.

Meanwhile, attention has returned to the dollar amid uncertainty over how Washington will resolve the issue of raising the nation's debt limit before a 2 August deadline in order to avoid default.

Amid discord between Democrats and Republicans, President Barack Obama earlier this week backed a plan brokered by the bipartisan group of six senators.

But there is no prospect so far for the cross-party plan to pass through both houses of Congress.