Region’s firms fear for future investment

Margaret Wood, the regional chairman of the IOD, warned that the eurozone rescue package unveiled yesterday after marathon negotiations in Brussels was the economic equivalent of giving more sweets to a naughty child.

But analysts have welcomed the three-pronged agreement, which was hailed by Chancellor George Osborne as a sign the eurozone appeared to be on the “right road”. After hours of tense negotiations, it was announced early yesterday that an agreement had been reached with banks on a 50 per cent write-off of Greek debt, easing fears the crisis could push the continent back into recession.

A complex mechanism to boost the eurozone’s main bailout fund to 1 trillion euro (£880bn) was also approved along with measures to tighten “coordination, surveillance and discipline” among eurozone countries on economic and financial policy.

It means that, coupled with an earlier decision to recapitalise vulnerable banks, the summit delivered on the package it promised and markets across the world surged on the news, reflecting investors’ relief.

“The package we have agreed is a comprehensive package that confirms that Europe will do what it takes to safeguard financial stability,” said European Commission President Jose Manuel Barroso.

London’s leading shares index hit its highest level since August 2, which was shortly after panic about the eurozone began to set in.

Some £41.5b n was added to the value of London’s top 100 shares, with Barclays the biggest riser, up 18 per cent.

Taxpayer-backed Royal Bank of Scotland and Lloyds, also made strong gains.

Elsewhere, France’s CAC-40 was ahead 6 per cent and the Dax in Germany jumped 5 per cent, and Wall Street also headed toward gains, with Dow Jones industrial futures rising 1.6 per cent and S&P 500 futures gaining 1.8 per cent.

The Greek market rallied on hopes the early morning deal would finally lift the spectre of government bankruptcy.

But Ms Wood, who is the managing director of Wakefield-based manufacturer, ICW (UK) said last night: “It is the British taxpayer who is going to foot the bill.

“This sends a very bad message to Yorkshire entrepreneurs struggling in difficult economic circumstances.

“It will take much needed money away from businesses that cannot get finance to grow and develop. Money is not being lent out to genuine businesses because we keep writing off these debts.

“We are devaluing the pound all the time.

“Instead we should be looking to ensure that Yorkshire businesses get the much needed investment they need to develop strong enterprises that will provide employment and wealth here in the county.”

Rachel Reeves, the Leeds West MP, who is Shadow Chief Secretary to the Treasury, told the House of Commons the “missing piece in the agreement” was the lack of any plan for jobs and growth.

She added: “Is it not the case that without growth we cannot solve the debt crisis, we cannot solve the banking crisis, and we cannot solve the jobs crisis?”

Prime Minister David Cameron said the deal struck in Brussels showed that the “key elements” were in place to defuse the crisis.

But he said members of the struggling single currency bloc had to “keep up the momentum” and hammer out details of the rescue package.

Updating MPs on developments, Mr Osborne said: “They have started down the right road and now they have to finish the job.”

CBI chief economic adviser Ian McCafferty said: “Businesses will be relieved by the announcement of what appears to be a more credible package of solutions to the eurozone debt crisis.

“Clearly a lot of work still needs to be done on the detail, but it does now appear that European leaders are united in their attempts to tackle the problems.

“This announcement will help support business confidence, which has been so battered in recent weeks.”

Institutions to cover Greece’s debts

At a glance: The “haircut” – private investors, who are predominantly financial institutions – to write-off 50 per cent of Greek debt while eurozone countries and the International Monetary Fund will provide an extra 100bn euro (£87bn) in rescue loans as a second bailout package, to lower the Greek debt to 120 per cent of GDP by 2020.

Bailout fund – the 440bn euro (£385bn) European Financial Stability Facility will be used to insure part of the losses on the debt of wobbly countries like Italy and Spain, rendering its firepower equivalent to around one trillion euro (£880bn).

Recapitalisation – vulnerable european banks to increase their cash buffers to protect against future crises to nine per cent, until next June. Initially, they must use private sources of capital to raise the 108bn euro, £94bn, needed, avoiding bonus and dividends if necessary.