Eurozone leaders hammer out Greece rescue plan

A spokesperson for the Greek government welcomed the plan, saying that "it fully fulfills our requests". "It is a message of stability which it is expected to have a positive impact on the Greek economy," he added.

"Europe has taken a big step in the face of a big challenge," Greek Prime Minister George Papandreou said after talks in Brussels, declaring himself satisfied.

French President Nicolas Sarkozy said the mechanism was "precise", "perfectly operational" and could be activated "in case of need as a last resort". 

European Commission President José Manuel Barroso, said involving the IMF had been the only way to reach a consensus. "We have solved this in the European family," he said. "I think this is the right decision at this time to face what is an exceptional problem."

Eurogroup President Jean-Claude Juncker, although in principle opposed to the intervention of the IMF, supported the final deal. "I believe it will send the right signal to financial markets," he said at the end of the summit.

Jean-Claude Trichet, president of the European Central Bank, expressed his opposition to the idea of resorting to the IMF. "If the IMF or some other body exercises the responsibility in lieu of the Eurogroup or instead of governments, it is evidently very, very bad," he told France's Public Senat television in an interview before the EU summit.

But he backed away from that statement on Thursday after the agreement was announced. "I consider that this workable solution preserves,what for us is decisive, the responsibilities of the governments of the euro area," he said. "I am confident that the mechanism decided today will normally not need to be activated and that Greece will progressively regain the confidence of the market," he added.

Trichet further stated that the involvement of the IMF in the aid mechanism did not infringe on the ECB's independence. "The independence of the central bank is sacrosanct and nobody is putting that into question for one second," he said. "I never said that IMF intervention was this or that. I have always said we must have maximum responsibility from the governments of the euro area".

Commenting on the outcome of the EU summit, Eurointelligence, a leading blog on euro currency matters led by FT columnist Wolfgang Münchau, said the deal was "a pretty good one". The deal struck last night is "an interesting and comprehensive" one, Münchau writes. "In fact, it is the beginning of a crisis resolution regime that would apply to other countries in trouble as well."

"This is, in our view, a pretty good deal. We are not quite sure what Germany gained in those days and weeks of utter chaos – perhaps a slightly larger share for the IMF than would otherwise have been case, no commitment to the timing and a more onerous trigger mechanism, but this will prove irrelevant in practice. What matters is who takes the lead."

In the European Parliament, Joseph Daul, leader of the the centre-right European People's Party (EPP), said European solidarity had proven "stronger than national interests" while "forcing member states to take their responsibilities".

Like Commission President Barroso, French MEP Daul "welcomed the fact that Europeans have come together and solved the problem 'as a family' while involving the IMF, a totally new mechanism since the launch of the common currency eleven years ago".

Guy Verhofstadt, former Belgian prime minister and leader of the liberal ALDE group in the European Parliament, said "a truly European solution" to the Greek crisis "would have been preferable" to one where the IMF is involved. "But a mixed solution is better than none," he said.

"The most important announcement however is that the ECB again accepts BBB+ government bonds as collateral," Verhofstadt added, saying "this will bring down interest rates of countries such as Greece". 

The liberal leader added that Europe's response "cannot stop here". "The deal is only a solution for the short-term problems. In the long run we will have to work hard to create an economic pillar next to the monetary pillar. This means the revision of the whole EU strategy for economic development, including making the EU 2020 strategy a success; establishing a European Monetary Fund; and creating a common market for bonds to fully exploit the potential of the European economy and to make it more resilient."

For the Greens, the financing plan for Greece only "exposes Europe's weakness". Rebecca Harms, president of the Green group in the European Parliament, said "the combination of IMF and EU support is more about saving face for Angela Merkel than furthering the necessary European integration."

"In the ongoing crisis Angela Merkel put German interests above common responsibility," Harms said. "But the weakening of the Euro that results from this decision will also have negative effects for the German economy. Today she comes home with a victory, but the consequences of her strategy for European integration remains to be seen."

The European Policy Centre, a Brussels-based think-tank, believes EU leaders have found an "acceptable compromise" on the Greek crisis, saying "any decision was better than continuing uncertainty."

"The initial reaction of international markets looks cautiously positive, but only the next weeks will say whether the worst is over."