EU banks' rescue plan breathes life into European markets

Pledges of eurozone policymakers to save banks from the spreading sovereign debt crisis soothed stocks in European markets on Wednesday after three consecutive dark days. Stocks in the region were hardly hit in the past few sessions on rising worries that a debt default by Athens will be a fact of life leading to banking collapse and hampering economic growth. In early trading, shares in Paris's CAC 40 turned positive at 2,932 points, up by 2.87 percent at 1216 GMT mainly due to bounce in banking stocks relieved by politicians moves to guarantee the safety of the zone's financial institutions. The index of banking sector rose by 6.07 percent. BNP Paribas, the French largest bank, was up by 5.89 percent to 28.78 euros (38.391 U.S. dollars). Societe Generale and Credit Agricole both suffered from rating downgrade saw their shares growing by 5.38 percent and 8.87 percent respectively. London'S FTSE 100 gained 2.11 percent while Frankfurt index rebounded by 3.36 percent. Despite fresh Moody's downgrade of Italy's credit rating late on Tuesday by three notches to A2, stocks in Milan resisted and rose by 2.3 percent. Optimism helped the European index, the EuroStoxx, to stand in green at 2,145 points, up 2.6 percent from the last trading session. On Tuesday, European Commissioner for Economic Affairs Olli Rehn said that the EU finance ministers agreed in Luxembourg on the need of a concerted banks recapitalization to stem volatility in financial markets and avoid a possible downturn. Moreover, French and Belgium decision to guarantee the financing of the joint banking group Dexia backed investors's hope to get out from the month-long financial crisis. The Franco-Belgian bank is the first bank to have to be bailed out due to the eurozone's sovereign debt crisis.