Euro Deal To Half Greek Debt

European Leaders have secured a last minute deal to the save the Euro during late night talks in Brussels on Wednesday night.

During the emergency meeting, representatives from 21 states brokered a deal that will see European banks that had lent money to Greece take a 'hair cut' by writing off 50% of the money owed to them by the troubled country.

Banks will also be forced to raise more capital to protect themselves against losses resulting from any future government defaults.

The third 'prong' in the deal will see an approved a mechanism to boost the eurozone's main bailout fund to around 1trilion euros.

However, the deal comes at a cost and will see the UK's contribution to the union increase by 5%.

Responding to the vote Labour's Shadow Foreign Secretary, Douglas Alexander MP, said: “The proposal to increase the European Union budget at this time by over 5% will strike most people as unjustified and wrongheaded.

“Last time the Prime Minister promised a freeze and then came out claiming that a rise was a victory. This time David Cameron must do better – he must not support another inflation busting rise in the European Union budget.

“The European Commission should be focussed on finding savings and better targeting its funds on the most crucial areas - not proposing unjustified budget increases.”

Although the agreement did not go as far as some hoped, the markets have responded well with the FTSE trading 115 points higher on Thursday morning at 5667.

The last ditch agreement rounds off a week of extreme tension that saw verbal battles between the French President Nicolas Sarkozy, David Cameron and German Chancellor Angela Merkel, while in the Italian Parliament, a fist fight broke out on Wednesday afternoon between rival parties.

(DW)