A €100bn deal to shore up Spain's banking sector has boosted the euro and financial markets.
Spain's Prime Minister said the €100bn EU and IMF bailout has avoided the need for a much larger national rescue package.
The euro rose nearly 1% to $1.26694, its highest level since 23 May, before pulling back to trade at $1.2627.
Asian markets rallied overnight, with Shanghai's index 1% higher, the Hang Seng up 2.43% and the Nikkei up 2.08% on news of the deal. US futures suggest the major equity markets across the pond will also open in positive territory.
However, the move could spook markets when they open on Monday as the bailout cash will be channelled through the government’s books, adding as much as 20% to Spain’s sovereign debt, the FT reports.
Spanish Prime Minister Mariano Rajoy (pictured) hailed the rescue package as a victory for the government, which had managed to avoid a wider bailout for the country.
He told reporters in Madrid: "If we had not done what we have done in the past five months, the proposal yesterday would have been a bailout of the kingdom of Spain," he said. "It was the credibility of the euro that won," he added.
Eurozone leaders did not specify whether the money would come from the €440bn European Financial Stability Facility or the new €500bn fund European Stability Mechanism (ESM), which is due to be created next month.
Loans from the ESM take priority over all private sector debt, which could mean a significant impact for holders of Spanish sovereign debt.
International Monetary Fund managing director Christine Lagarde described the move as “a crucial step for the success of the Spanish authorities’ strategy”.
“I strongly welcome the statement by the eurogroup, which complements the measures taken by the Spanish authorities in recent weeks to strengthen the banking system.
"Providing a credible backstop to recapitalise weaker segments of the banking system has been a key recommendation of the IMF's recent Financial Sector Assessment Program (FSAP) conducted in Spain.
“This scale of proposed financing, which is consistent with the capital needs identified in the FSAP, gives assurance that the financing needs of Spain's banking system will be fully met.”
Spain is the fourth major economy to seek an international bailout since the eurozone debt crisis began, following in the footsteps of Greece, Ireland, and Portugal.
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