The European Union agreed on a 750 billion euro ($955 billion) bailout plan to stave off the spreading sovereign debt crisis (WSJ). The plan includes 440 billion euros of loans from eurozone governments, 60 billion euros of EU emergency funding, and 250 billion euros from the IMF. The European Central Bank also said it had agreed to buy eurozone government and private bonds, while the U.S. Federal Reserve said it would reopen swap lines with other central banks. The euro and European stocks rose sharply. Investors rallied enthusiastically after the ECB's announcement, since it failed to announce such efforts at its governing council meeting last week. European parliaments still need to approve their contributions. German Chancellor Angela Merkel--who hesitated to approve the join EU-IMF aid package for Greece--said Germany's government intends to approve the new aid package Tuesday.

Merkel suffered a critical defeat in a regional election (FT) in North Rhine-Westphalia, related to her decision to support the Greek bailout. Her coalition will lose its majority in the upper house of German parliament, threatening her reform plan to boost eurozone growth.

Analysis:

On FT.com, Mohamed El-Erian says many questions about the aid package remain, including how these interventions will be approved, financed, and executed, and how effective will the package be.

In the Daily Telegraph, Ambrose Evans-Pritchard says it is unclear how long Germany will continue to acquiesce in the bailout, considering Merkel's loss in North Rhine-Westphalia and in the upper house of parliament.

Background:

This CFR Backgrounder profiles five heavily indebted eurozone countries.

 

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