EU approves massive bailout

08:17, May 11, 2010      

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A nearly $1 trillion rescue package to prevent the Greek sovereign debt crisis spreading in Europe will impact on various facets of the Chinese economy, analysts have said.

The deal agreed earlier on Monday pledged $670 billion of loans and loan guarantees to any euro zone country needing funds, plus about $322 billion from the International Monetary Fund (IMF).

The aim is to keep the euro currency being torn apart and derailing the global economic recovery.

Markets cheered the news with world stocks rising nearly 3 percent. Global stocks as measured by MSCI were up 2.8 percent with its emerging market-only counterpart jumping more than 3 percent.

The euro gained nearly 2 percent on the US dollar.

In China, the benchmark Shanghai Composite Index gained 10.38 points, or 0.4 percent while in Hong Kong, the Hang Seng Index rose 506.35 points, or 2.54 percent, to finish at 20,426.64.

In Europe, oil prices rebounded from last week's 14 percent sell-off, rising to $78 a barrel.

But Chinese analysts said the country faces uncertainties in its overseas financial portfolio, exports, currency policy and exit from the economic stimulus package.

"The rescue package will help the markets regain confidence and alleviate panic about not only the Greek economy, but also other European economies," said Zhang Xiaoji, senior economist with the State Council's Development Research Center.

"The deal will help create a stable economic environment and will help reduce people's concerns that it will lead to a double dip recession in Europe," said Stephen Joske, director of the China forecasting service at Economist Intelligence Unit.

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