Europe's New Deal Has Markets Cheering

"European stocks rallied after policy makers eased repayment rules for Spanish banks, relaxed conditions for possible aid to Italy and unveiled a $149 billion growth plan for the region's economy," Bloomberg News reports this morning. "U.S. index futures and Asian shares also rose."

The Wall Street Journal sums up the reaction in the markets this way: "Investors welcomed an agreement by euro-zone leaders for banks to receive aid directly from the region's permanent bailout fund, without adding to government debt.

What's particularly pleasing to big investors is the part about not adding to government debt, says The Financial Times:

"Eurozone leaders agreed to radically restructure Spain's [100 billion euros] bank recapitalization plan during all-night talks at an EU summit that ended in the early hours of Friday. The agreement will result in EU bailout funds eventually being injected directly into teetering Spanish financial institutions, meaning Madrid can sweep the burden of the bailouts off its sovereign books."

That, in turn, should help keep a lid on the Spanish government's borrowing costs.

While there have been many plans and packages in the recent past, The Associated Press writes from Brussels that "after 18 disappointing summits, Europe's leaders appeared Friday to have finally come up with a set of short-term measures and long-term plans that show they are serious about solving their crippling debt crisis." The wire service adds that "the scale of the moves were unexpected and provided investors a reason for optimism, even as analysts cast doubt on the plans' feasibility and noted that some fundamental problems with the common currency remain."

Update at 10:15 a.m. ET. From Planet Money:

"A Baby Step Toward A United States Of Europe."

Update at 10 a.m. ET. U.S. Market Rallies Too:

About 30 minutes after the start of trading on Wall Street, the Dow Jones industrial average is up just over 200 points, or about 1.6 percent. Other indices are up by about the same percentage.

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