Europe resigned to a partial Greek default

Europe’s leaders appear to have reached a provisional deal to tackle the eurozone’s debt crisis.

Though still unofficial, the bloc’s big guns, Germany’s Angela Merkel and France’s Nicholas Sarkozy, seem to have finally accepted a temporary Greek default is the only option.

The Franco-German pact came only hours before the emergency summit. It involves a buyback of Greek bonds as well as debt swap. However, a levy on banks, favoured by France, appears to have been binned.

The deal also seems set to give the euro zone’s financial rescue fund sweeping new powers to prevent contagion.

Recent market uncertainty had raised fears Italy and Spain could be dragged into the debt crisis.

That possiblility, that one of the eurozone’s biggest economies could go under, appears to have concentrated minds.

Markets rose on news of the possible agreement.

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