EU leaders agree to Greece bailout

European leaders have reached an agreement to bailout Greece, which is suffering from a huge debt crisis.

At midday today, EU President Herman Van Rompuy confirmed a deal had been struck between the EU's largest countries, Germany and France, and the Greek government to provide a financial support package.

The European blue chip Dow Jones Euro Stoxx 50 index rose six points, or 0.2%, while the FTSE index of UK shares was up 0.8%.

The yield on Greece's two-year sovereign debt fell by 0.54% on the news, to 4.92%.

German chancellor Angela Merkel told Bloomberg: "Greece won't be left alone, but there are rules, and these rules must be adhered to."

Greece has seen its deficit hit 12.7% of GDP, more than four times the EU limit of 3%, and it was at risk of going bankrupt.

However, the risk to the euro currency forced EU leaders to create a bailout package to prevent Greece from going under.

Details of the deal have yet to be released, but it is likely Greece will have to abide by strict constraints on its public finances.

However, managers say Greece faces some long-term structural problems.

Stewart Cowley, head of fixed income at Old Mutual Asset Managers, says: "Greece has a working-age population of less than 8m people, and 68% of them work in the services industry. They have $70bn of financing this year."

More to follow...