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place nearly three -- She said the attempts took place nearly three | :00:04. | :00:12. | |
years ago. Now for the latest financial news. | :00:12. | :00:17. | |
Hello and welcome to World Business Report. | :00:17. | :00:23. | |
Back from the brink - EU leaders agree a larger bailout fund and | :00:23. | :00:29. | |
banks accept a 50% write-off of Greek debt. Much of the detail | :00:29. | :00:34. | |
still needs to be sorted. Asian stock currency and commodity | :00:34. | :00:40. | |
markets rise after European leaders raise hopes for the eurodebt crisis | :00:40. | :00:48. | |
will be contained. -- eurozone debt crisis will be contained. GDP is | :00:48. | :00:58. | |
:00:58. | :01:02. | ||
expected to show growth picking up After ten hours of talks, European | :01:02. | :01:06. | |
leaders have unveiled a plan which they hope will stabilise the | :01:06. | :01:13. | |
eurozone. The key to the deal - a break in the deadlock between banks | :01:13. | :01:20. | |
and governments. Banks holding Greek debt will accept a loss of | :01:20. | :01:25. | |
50%. Leaders also agreed a mechanism for the eurozone's main | :01:25. | :01:33. | |
bailout fund to boost its fire power to $1 trill -- 1 trillion | :01:33. | :01:38. | |
euro. The framework should be in place in November. Banks will be | :01:38. | :01:42. | |
forced to raise more capital to shield them from any losses. How | :01:42. | :01:50. | |
will all of this work in practice? Let's talk to Andrew Walker who is | :01:50. | :01:55. | |
in Brussels. Hello, Andrew. How is it going to work in practice? And | :01:55. | :02:01. | |
where is the money going to come from? Part of the idea of it is to | :02:01. | :02:05. | |
make more effective use of the money that's already been committed. | :02:05. | :02:10. | |
The financial guarantees made by the eurozone governments themselves | :02:10. | :02:14. | |
and it is politically enormously important to those countries that | :02:14. | :02:17. | |
they did not end up having to commit more money to it. That's | :02:17. | :02:23. | |
going to be used to fund the system of financial guarantees, a kind of | :02:23. | :02:28. | |
insurance against losses on new bonds issued by some eurozone | :02:28. | :02:34. | |
governments. The idea is that you, is that you underwrite more lending | :02:34. | :02:38. | |
by, let's say for example, Italy, by doing it through the system of | :02:38. | :02:42. | |
guarantees than you can do by directly lending from the European | :02:42. | :02:46. | |
bailout agency itself. The other elwant is that they're going to | :02:46. | :02:51. | |
establish some sort of, what they call a special-purpose vehicle to | :02:51. | :02:56. | |
put money, to encourage money from outside Europe to go in to the | :02:56. | :02:59. | |
European bailout system. So the obvious source of help there is | :02:59. | :03:04. | |
going to be some of the big emerging economies. China is the | :03:04. | :03:08. | |
most obvious target. And we do know the head of the European Bailout | :03:08. | :03:13. | |
Agency is planning to go to China later in the week to see if he can | :03:13. | :03:23. | |
:03:23. | :03:23. | ||
persuade them to contribute. What about this 50% write-down? Doesn't | :03:23. | :03:29. | |
mean to say that the Greek debt mounten won't be reduced by 50%, | :03:29. | :03:37. | |
does it? A lot of that debt is privately owned? Absolutely. I mean, | :03:37. | :03:44. | |
this deal applies only to, it's a voluntary one. So I suppose many | :03:44. | :03:48. | |
private holders of the debt won't take part in it. It only applies to | :03:48. | :03:54. | |
the private sector. So the debt owed to the Merl Monetary Fund -- | :03:54. | :03:59. | |
International Monetary Fund, the eurozone countries, debt is held | :03:59. | :04:03. | |
there. Those won't be written down by this 50% figure, which is why | :04:03. | :04:10. | |
you do come to a much smaller overall figure for the amount of | :04:10. | :04:14. | |
debt relief Greece will get. It's a relatively large figure. More than | :04:14. | :04:18. | |
double the headline figure they agreed only in July. A figure | :04:18. | :04:22. | |
that's never been implemented. So, clearly, it does make a difference. | :04:22. | :04:27. | |
Again, on this one, there is still a lot of detailed negotiation to be | :04:27. | :04:31. | |
done. However, the key point is that the leaders of the | :04:31. | :04:34. | |
negotiations on behalf of the international banks have agreed at | :04:34. | :04:39. | |
least to this headline figure. Absolutely. Thank you very much. | :04:39. | :04:45. | |
How have the markets been reacting so far? Over in Asia, Rico is in | :04:45. | :04:52. | |
the BBC Singapore office. What's been happening? A good reaction? | :04:52. | :04:57. | |
Very popular reaction. Agents sparked, the currency and | :04:57. | :05:00. | |
commodities all in positive territory after European leaders | :05:00. | :05:04. | |
agreed to boost the region's rescue funds. Basically, it's giving a lot | :05:04. | :05:10. | |
of investors here hope that the eurozone debts crisis will be | :05:10. | :05:17. | |
contained. Most of the regional markets have been down by 15% to | :05:17. | :05:22. | |
20%. The likes of Japan, South Korea, Singapore, Australia, Hong | :05:23. | :05:28. | |
Kong all trading higher. Investors having the feeling they'd want to | :05:28. | :05:34. | |
get back in to risky assets. The euro is extending its gains in | :05:34. | :05:44. | |
:05:44. | :05:48. | ||
Asian trade. And you have Asian currencies from the -- from the | :05:48. | :05:57. | |
different currencies. Oil price is going up. US crude nearing $91. As | :05:57. | :06:02. | |
for the price of gold, also soaring to its highest level in more than a | :06:02. | :06:11. | |
month. Now trading add $1,721. -- at $1,721. Thank you very much. | :06:11. | :06:14. | |
Also weighing down the summit is deep concern about Italy which has | :06:14. | :06:24. | |
:06:24. | :06:26. | ||
a public debts 1.8 trill -- public debt of 1.8 trillion. Berlusconi | :06:26. | :06:32. | |
has delivered a plan of action. Hello. It's really vital, isn't it, | :06:32. | :06:41. | |
that this plan of action is enacted? Silvio Berlusconi is | :06:41. | :06:45. | |
pretty beleaguered? It is fundamental that these good | :06:45. | :06:50. | |
intentions will be transformed in actions. And the government is | :06:50. | :06:54. | |
ready to do it but the coalition is not very strong and there are | :06:54. | :06:57. | |
important differences within the coalition and between the coalition | :06:57. | :07:02. | |
and the opposition. So we will see. As far as the public are concerned, | :07:02. | :07:06. | |
raising the retirement age, they'd be very opposed to it. But reforms | :07:06. | :07:14. | |
like that are key to make it more competitive? Yeah. There is a lot | :07:14. | :07:22. | |
of new approach, I would say, in the sense of opening hours for | :07:22. | :07:27. | |
shops will be increased or the intention is they should be | :07:27. | :07:32. | |
increased. And in many occupations, self-employed occupations, there | :07:32. | :07:37. | |
will be a more liberal approach. So this is important. More | :07:37. | :07:41. | |
privatisation, so the public debt will be reused. Thank you very much. | :07:41. | :07:45. | |
That's all we have time for. Thank you very much for joining us from | :07:45. | :07:50. | |
Rome. To reduce the debt mountain, growth in Europe is key. It's an | :07:50. | :07:53. | |
issue the US is struggling with too. After a volatile few months, | :07:53. | :07:58. | |
including the downgrade of America's credit rating, economists | :07:58. | :08:02. | |
are slightly more optimistic about the US GDP. They're predicting an | :08:02. | :08:07. | |
expansion of as much as 2.5% for the third quarter. The housing | :08:07. | :08:13. | |
market remains a major blackspot. Even the beach doesn't provide an | :08:13. | :08:17. | |
escape from the chill winds blowing through the economy. This is all | :08:17. | :08:24. | |
that remains of plans to build a luxury apartment building here in | :08:24. | :08:28. | |
New Jersey. The project stalled during the recession. A blow to the | :08:28. | :08:32. | |
city. It would have been a major spike in the economy. More | :08:32. | :08:36. | |
importantly, the fact that piece of property was developed. If the | :08:36. | :08:41. | |
economy had remained the same, it would have spurred additional | :08:41. | :08:48. | |
development down. This professor agrees. He said housing is holding | :08:48. | :08:53. | |
back growth. In a normal economic cycle, housing and construction are | :08:53. | :08:57. | |
usually post recession economic locomotives. This time around, | :08:57. | :09:01. | |
they've held back the recovery train. We've never had a strong | :09:01. | :09:06. | |
recovery without a housing recovery. The unfinished apartment block, a | :09:06. | :09:11. | |
short stroll from here, is in some ways a symbol of the broader | :09:11. | :09:17. | |
economy which itself is struggling to grow. And then in here, we have | :09:17. | :09:22. | |
a project my husband and I did. That's making its toll on | :09:22. | :09:26. | |
businesses here on the boardwalk. The worst thing for me in all of | :09:26. | :09:32. | |
this is putting people out of work. We employ right now about 100 | :09:32. | :09:36. | |
people. In the summer, over 200. And the lay-offs have been more | :09:36. | :09:40. | |
drastic this year because I've learned to be more diligent with | :09:40. | :09:44. | |
the payroll, which in our industry is the biggest problem. Parts of | :09:44. | :09:48. | |
the economy are starting to improve but with unfinished projects like | :09:48. | :09:52. | |
this one dotted across the countries, dreams of a robust | :09:52. | :10:01. | |
recovery may turn out to be built on sand. | :10:01. | :10:05. | |
So just to recap - it's so far so good in terms of the reaction to | :10:05. | :10:09. | |
the debt crisis deal on the markets. There was a bit of a lacklustre | :10:09. | :10:15. |