Sarkozy :Eurozone to boost bailout fund to 1 trln euros

Earlier offficials said banks agreed to take a 50 percent loss on Greek debt Eurozone leaders have agreed to leverage the firepower of their bailout fund to one trillion euros ($1.39 trillion), French President Nicolas Sarkozy said Thursday. He announced the agreement at the close of almost 10 hours of summit talks aimed at hammering out a package of measures to contain Europe's two-year debt crisis.
Earlier offficials said the eurozone had sealed a grand deal to overcome its festering debt crisis  when banks agreed to take a 50 percent loss on Greek debt.
Greece's Prime Minister George Papandreou hailed "a new era, a new chapter" for the debt-strapped nation.
"It will be a new start for us. But the work must continue," Papandreou told reporters.
"We have escaped the trap of default," he said, adding that it was a "question of survival" for his country.
IMF chief Christine Lagarde also voiced satisfaction with what she called "significant progress" on Eurozone financial crisis issues.
"I welcome the steps taken today by the Eurozone leaders toward establishing a comprehensive framework to address the crisis facing the region, and I am encouraged by the substantial progress made on a number of fronts," she said in a statement released in Brussels.
The Institute of International Finance  welcomed a "comprehensive package of measures to stabilize Europe, to strengthen the European banking system and to support Greece's reform effort."
"We welcome the announcement by the leaders of the Euro Area," added a statement quoting Charles Dallara, managing director of the Washington-based global association of financial institutions.
Eurozone officials announced the deal following tough talks in Brussels between leaders of the eurozone and the Institute of International Finance banking lobby to force the private sector to share the pain of Greece's debt burden.
The agreement was the last and perhaps toughest chapter to negotiate in a wide-ranging four-point plan to find a lasting solution to Europe's festering debt crisis.
Convincing banks to erase billions in Greek debt was a key part of a grand deal leaders had pledged to deliver at a eurozone summit, along with a bank recapitalisation plan and a beefed-up rescue fund to soothe fears of a global recession.
The banks had agreed to take a 21-percent "haircut" on the Greek bondholdings as part of a second bailout for Athens agreed at a July summit, but the economic situation has deteriorated since then.
Governments wanted the banks to accept a 50-percent "haircut" that would slice off 100 billion euros from Greece's 350-billion-euro debt, but the lenders had offered 40 percent.