Leaders agree eurozone debt deal

BRUSSELS, Oct 27 (BBC): European leaders have reached a 'three-pronged' agreement described as vital to solve the region's massive debt crisis. They said banks holding Greek debt accepted a 50 per cent loss, the eurozone bailout fund would be boosted and banks would have to raise more capital. Shares on European markets rose sharply on news of the deal. The agreement is aimed at preventing the crisis spreading to larger eurozone economies like Italy, but the leaders said work still needed to be done. After marathon talks in Brussels, they agreed a mechanism to boost the eurozone's main bailout fund to about 1 trillion euros (£880bn; $1.4tn). Banks must also raise more capital to protect them against losses resulting from any future government defaults. BBC business editor Robert Peston says it is perfectly clear that EU leaders have bought some time, and for a few weeks and maybe longer the markets will give them the benefit of the doubt. The framework for the new fund is to be put in place in November. Meanwhile, EU leaders welcomed Italian Prime Minister Silvio Berlusconi's pledge to balance his country's budgets and implement reforms to bring down its 1.9tn-euro debt. Correspondents say Mr Berlusconi had been under huge pressure to prove he was serious about austerity measures. The announcement of the deal helped lift the euro, with investors reacting positively to the outlook for the region's growth and single currency. "The eurozone has adopted a credible and ambitious response to the debt crisis," a visibly tired French President Nicolas Sarkozy said at a news conference early in the morning in the Belgian capital. "Europe is closer to resolving its financial and economic crisis," said Jose Manuel Barroso, president of the European Commission, in a report later to the European Parliament. "We are showing that we can unite in the most difficult of times." 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 problems and fuelling uncertainty.