Greek market welcomes EU package

Greece’s borrowing costs fell sharply today and stocks rallied after the European Union unveiled a trillion-dollar plan to contain the continent’s spreading debt crisis and boost the euro.

The difference between yields on Greek 10-year bonds and their benchmark German equivalents was at 5.21%, down massively from a record 10.25% on Friday. The general share index on the Athens stock exchange gained 9.68% in midday trading, reaching 1,788.32 points.

Under the three-year plan adopted in Brussels, countries from the 16-nation eurozone would promise backing worth €440bn for troubled governments.

The IMF would contribute an estimated additional €250bn and the EU €60bn.

Separately, eurozone leaders on Saturday gave final approval for an €80bn rescue package of loans to Greece for the next three years to stave off default. The IMF also approved its part of the rescue package – €30bn of loans – yesterday.

Last week, global markets suffered big losses and the euro plunged on fears the Greek debt crisis could spread to other weak European economies.

Greek finance minister George Papaconstantinou said the agreements mean his country would have no trouble paying off creditors.

“Over the next few days, payment will start of the first section of the loans from the European Union and the International Monetary Fund, so that the country has no problems whatsoever with its borrowing needs and servicing its debt this month, and for months to come,” Mr Papaconstantinou said.

Greece was forced to stop borrowing from international markets after the interest demanded by investors to buy its bonds rocketed, reaching more than four times that paid by Germany.

The international loans were the country’s only shield against bankruptcy on May 19, when nine billion euro in debt must be redeemed.

In return, Athens announced painful austerity cuts over the next three years, prompting union anger and violent protests last week in which three people died.