EU leaders reach crisis deal

Private investors have agreed to accept losses of 50 per cent on their Greek bonds, an official says, removing the last apparent roadblock to a broad European plan to solve the continent’s debt crisis.

At the emergency summit in Brussels, European leaders had already agreed to force banks to raise €106 billion ($A142.33 billion) by June - partially to ensure they could weather the expected losses on Greek debt.

Details of the deal are beginning to emerge, with French president Nicolas Sarkozy telling a press conference that there will be no Greek default.

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He said that Greek losses for investors would be about €100 billion and that Greek debt will fall to 120 per cent of GDP - but not until 2020.

According to Mr Sarkozy, the bailout fund will set up "powerful firewalls" to prevent contagion.

EU leaders also neared agreement on boosting the firepower of the continent’s bailout fund in order to prevent larger economies from finding themselves in need of a rescue like Greece’s.

The leaders are under immense pressure to finalise their plan after multiple delays and half-baked solutions.

Market confidence was waning and fears were growing that the two-year-old crisis could push Europe and much of the developed world back into recession.But the third prong of their plan - finding a way to reduce Greece’s crushing debts, which are on track to top 180 per cent of economic output - had been proving difficult.

German Chancellor Angela Merkel told MPs in Berlin that the goal was to bring Greece's debt down to 120 per cent of economic output by 2020.

There were concerns that that would require losses that the banks weren’t willing to take on voluntarily. Having a voluntary deal is important because imposing losses on banks can trigger massive bond insurance payments that risk creating huge turmoil on global financial markets.

A European official said today that a voluntary deal had been reached.Another official confirmed that the banks agreed to take losses of 50 per cent of their Greek bonds.

According to Greece’s debt inspectors that would take the country’s debt to just above 120 per cent by 2020.

The officials spoke on condition of anonymity pending an official statement.A spokesman for the organisation that has negotiated on behalf of the banks said he would release a statement soon, without confirming the deal.

Australian share trading has been halted as the ASX deals with a trading glitch, leaving investors unable to react to earnings news and developments in Europe.

"It's risk on," said Bell Direct equities analyst Julia Lee. "I would expect the market to have traded up by 0.4 per cent by now if it could."

Australian markets have tracked the European-US dollar trade since the beginning of the month, she said, as attention turned toward Europe's bail-out troubles. The euro has gained 1 per cent against the greenback today on the news of the European agreement, or 1.4 US cents. Ms Lee said the Australian shares would probably be moving in line with that currency pair if they could trade.

"Risk currencies are gaining and risk assets are gaining," she said.

Also Asian stocks and US futures are moving higher, which would most likely lift local stocks.

At a press conference in Canberra a short time ago, Federal Treasurer Wayne Swan said the world must see a comprehensive plan from European leaders to deal with sovereign debt problems.

"We cannot afford any more stumbles or missteps from the Europeans. It's critical that we see a comprehensive plan announced by European leaders as soon as possible," Mr Swan said.

"It needs to be a durable and credible plan and it needs to be for the long term."

The world had paid a very high price for Europe’s failure to act over the past 18 months, Mr Swan said.

The federal government fears a recession in Europe could spread to the rest of the global economy.