Barroso: Europe 'closer to resolving eurozone crisis'
European Commission President Jose Manuel Barroso has said Europe has moved closer to solving the eurozone debt crisis, as an agreement was reached in Brussels.
Addressing the European Parliament in Strasbourg, Mr Barroso said the deal showed the EU could unite in the most difficult of times.
He also announced the appointment of a commissioner dedicated to the euro.
Shares on European markets rose sharply on news of the deal.
After marathon talks in Brussels, European leaders agreed:
- Banks holding Greek debt would accept a 50% loss
- A mechanism to boost the eurozone's main bailout fund to about 1tn euros (£880bn; $1.4tn)
- Banks must also raise more capital to protect them against losses resulting from any future government defaults
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.
BBC business editor Robert Peston says it is perfectly clear that EU leaders have bought some time; for a few weeks and maybe longer, the markets will give them the benefit of the doubt.
The ambition is not in doubt but many crucial details are missing and the test of this deal lies in the weeks ahead.
Greece has been given a chance to escape its debt trap but long years of austerity lie ahead and its economy is still shrinking.
The 1tn-euro bailout fund will be lower than some people think necessary to protect big economies like Italy and Spain. The test will be whether it lowers their borrowing costs.
With this deal, some time has been bought. Some of the crucial details of how, for instance, the rescue fund will work will not be hammered out until November.
Hanging over all of this is the question of growth. All of these calculations, commitments and expressions of determination can be dismissed if Europe's weakest countries do not return to growth.
The framework for the new fund is to be put in place in November.Euro lifted
"I am pleased to stand before you this morning and confirm that Europe is closer to resolving its financial and economic crisis and to getting back on a path of growth," Mr Barroso said.
"We are showing that we can unite in the most difficult of times."
He said the post of "super-commissioner" would be created to deal with the euro and give extra powers to the current EU Economic Commissioner, Ollie Rehn.
The leadership structure of a new framework for running the eurozone will rival the decision-making mechanism of the wider European Union, our business editor says, with the implication that the eurozone will more closely resemble a super-state.
The announcement of the deal helped lift the euro, with investors reacting positively to the outlook for the region's growth and single currency.
How much is a trillion?
A million seconds is 11.57 days
A billion seconds is 31.7 years
A trillion seconds is 31,709 years
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.
The fragility of the eurozone member economies was underlined late on Thursday when French President Nicolas Sarkozy downgraded his forecast for French economic growth from 1.75% to 1% for next year.
He said the French government would have to find 6-8bn euros in supplementary budget savings and that decisions on this would be taken "within 10 days", after the next G20 summit on 3-4 November.
Critics have accused policymakers of not doing enough to resolve the issues, contributing further to problems and fuelling uncertainty.
Leaders of the 17 eurozone nations had been in meetings since Wednesday trying to hammer out a deal to help Greece put its national finances in order and underpin other European economies such as Italy.
Because banks have agreed to shoulder losses on Greek bonds, the country's burden has been reduced, cutting its debt down to 120% of its gross domestic product by 2020.
Analysis: Will the plan work?
Commentators predict the effect of the three-pronged deal.
The Independent's Hamish McRae says so far markets have not reacted like "headless chickens". He expects only a modest recession in Europe.
Allen Mattich at the Wall Street Journal calls it a "eurofudge" and predicts the plan will be a failure. He sees the imbalances between the eurozone countries as so large that the euro will inevitably fail.
In the Financial Times, Sir John Major agrees. He says he kept Britain out of the common currency because of the flaws in the euro - flaws the bail-out doesn't get rid of.
Greek Prime Minister George Papandreou hailed the deal, saying: "We can claim that a new day has come for Greece, and not only for Greece but also for Europe."
The eurozone leaders also said the firepower of the main euro bailout fund - known as the European Financial Stability Facility (EFSF) - would be boosted from the current 440bn euros to about 1tn euros.
Bank recapitalisation - the third key element of the package - was agreed earlier.
The banks will now be required to raise about 106bn euros in new capital by June 2012, and governments may have to step in, despite the unpopularity of further bank bail-outs.
It is hoped that this will help shield the banks against losses resulting from any government defaults and protect larger economies - like Italy and Spain - from the market turmoil.