France and Germany have come to an agreement before the weekend EU summit that allows the countries to boost the rescue fund of the Eurozone up to £1.75tn as part of a new plan to help calm the sovereign debt crisis and will be introduced to other leaders at the summit. The news came after severe market pressure was placed on France following a warning that Moody’s could remove the AA rating because of how much it costs to bail out the Eurozone members and the banks.
As part of the new deal France would be forced to pay a percentage point over the price that Germany pays in order to borrow any money over the next ten years to help close the gap between the two countries’ bond yields which are now the widest they have been since 1992.
The news was good for US investors as the stock markets kicked back after it was announced with the Dow Jones increasing by about 2.2% helping to recover from its 1% fall earlier in the day. This is one of the first times that the US markets have been joyful about news in the EU as they have been uneasy about the state of the EU and most news has caused the market to actually fall.
According to diplomats from the EU, the new Franco-German arrangement will help to create firewalls for the Eurozone members to help reduce the threat of a major credit or debt crisis in the smaller and weaker countries.
