Economic heavyweights France and Germany have agreed to load up the EU bail out fund with up to two trillion euros in order to deal with the sovereign debt crisis and bank recapitalization.
France and Germany have reached agreement to boost the eurozone's rescue fund to €2tn (£1.75tn) as part of a "comprehensive plan" to resolve the sovereign debt crisis, which this weekend's summit should endorse, EU diplomats said.
The growing confidence that a deal can be struck at this Sunday's crisis summit came amid signs of market pressure on France following the warning by the ratings agency Moody's that it might review the country's coveted AAA rating because of the cost of bailing out its banks and other members of the eurozone. The leaders of France and Germany hope to agree a deal that will assuage market uncertainties or, worse, volatility, in the run-up to the G20 summit in Cannes early next month.
France would now have to pay more than a percentage point - 114 basis points - over the price paid by Germany to borrow for 10 years as the gap between the two country's bond yields widened to their highest level since 1992.
The news cheered US investors. All the major stock markets surged, with the Dow Jones Industrial Average rising 250 points, or 2.2%, to 11,651, after earlier falling by 101 points earlier in the day.
It bears pointing out that this is not a long term solution to Europe's debt woes. But it is a strong, united effort to deal with the immediate crisis and as long as things don't get any worse, the danger would seem to have lessened considerably for the immediate future.