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Banks have been convinced to erase billions in Greek debt, as Europe's leaders hammer out a deal aimed at saving the euro zone.
PARIS -- European leaders and bankers meeting in Brussels struck a last-minute, "three-pronged" deal overnight Wednesday on solving the region's two-year debt crisis.
The deal means that privately owned banks will accept a 50 percent loss on their Greek bond holdings, while Europe's main bailout fund will be bolstered to 1 trillion euros ($1.4 trillion).
The framework for the new European Financial Stability Facility fund is to be put in place in November.
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The BBC reported that banks will also be obliged to raise more capital to protect themselves against any future government defaults.
At a news conference Thursday morning after eight hours of talks, French President Nicolas Sarkozy said the deal "represents an effort of 100 billion euros ($150 billion)".
Sarkozy told reporters:
"Because of the complexity of the issues at stake, it took us a full night. But the results will be a source of huge relief worldwide.
"We have reached an agreement, which I believe lets us give a credible and ambitious and overall response to the Greek crisis".
The euro surged on the news of the deal, which the Associated Press says is an early sign that investors may welcome it.
French Finance Minister Francois Baroin told French radio RTL that the deal had saved the single currency from collapse, calling it “an ambitious, comprehensive and credible response”.
"That's what's going to resolve this business (the debt crisis), that's what will get us out of this zone of turbulence, that's what will allow the economic rebound, that's what will stabilize the euro zone and world growth."
But he added that more needed to be done ahead of next week's G20 summit in Cannes to stop the developed world from falling into recession.
The BBC says that the deal means EU leaders have bought themselves “some time”, and that markets may give them the benefit of the doubt for perhaps a few weeks.
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