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Dow Surges 400 as EU Rescue Impresses

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Published on May 10, 2010

Dow Surges 350 as EU Rescue Impresses
http://www.foxbusiness.com/story/mark...

EU sets up $1 trillion eurozone/IMF defense package to protect euro from disintegration
http://www.foxnews.com/world/2010/05/...

World Stocks, Euro Soar on EU's $1 Trillion Rescue
http://www.foxnews.com/world/2010/05/...

Federal Reserve Opens Credit Line to Europe
http://www.foxnews.com/world/2010/05/...


In a three-year plan, the European Commission will make euro60 billion ($75 billion) available for loans and guarantees to indebted European countries. The 16-nation eurozone promised backing for another euro440 billion ($570 billion), should it be necessary, and the International Monetary Fund would contribute an additional sum of at least half of the EU's total contribution, or euro250 billion.

In addition, the European Central Bank announced what analysts called its "nuclear option" -- buying public and private bonds to lower borrowing costs and increase liquidity. Meanwhile, the U.S. Federal Reserve reopened its dollar swap operations, in which it offers billions of dollars overseas to boost banks' cash positions in return for foreign currency. Other central banks, including the Bank of Canada, the Bank of England, the ECB, the Bank of Japan and the Swiss National Bank, are also involved in the effort.

"This is shock and awe, Part II and in 3-D, with a much bigger budget and a more impressive array of special effects," said Marco Annunziata, chief economist at UniCredit Group in London.
"This truly is overwhelming force, and should be more than sufficient to stabilize markets in the near term, prevent panic and contain the risk of contagion," he said.

Market sentiment turned sour last week as a euro110 billion ($142 billion) loan package for Greece failed to calm investors, who feared Europe's response was too little and too late to keep confidence in the euro from deteriorating and potentially collapsing.

The Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent. Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank, are also involved in the effort.

The Fed said action is being taken "in response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe." The debt crisis first erupted in Greece and there are fears that it could spread to Spain, Portugal and other eurozone countries. The crisis has pushed up demand for the U.S. dollar and has sharply weakened the value of the euro, the currency used by 16 European countries. The Fed also said the action was being taken to "prevent the spread of strains to other markets and financial centers." The Bank of Japan will be considering similar action soon, the Fed said. A so-called "swap" line with the Bank of Canada provides up to $30 billion. Figures weren't provided for the other central banks. The arrangements are authorized through January 2011.

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