MercoPress. South Atlantic News Agency

France and Germany committed to assist Greece with debt problems

However German Chancellor Angela Merkel said there are rules, “and rules must be adhered to”

European Union leaders meeting in Brussels agreed on Thursday to assist Greece with its debt problems, though EU President Herman Van Rompuy offered no details as to what that will entail.

To the relief of investors, Van Rompuy said EU leaders “fully support the efforts of the Greek government”. He also called on the Greek authorities to implement the measures outlined in their Stability Programme, designed to tackle Athens debt problems.

German Chancellor Angela Merkel reiterated Van Rompuy's assurances, confirming Greece “will not be left on its own”. However, she also declined to shed light on the exact design of the plan to tackle the fiscal difficulties facing the debt-stricken country.

In fact, Merkel stressed that the Euro zone’s strict rules governing the way EU members can be bailed out would not be broken. She said: “There are rules and these rules must be adhered to.'

The markets rose immediately on the news that Germany and France are committed to helping Greece, with all the major Euro zone indices regaining the losses incurred in morning trading.

Meanwhile, the Euro, which has been ruthlessly shorted by tactical investors during the crisis, rose against the US dollar on the news of an agreement. It had been in decline for several days.

After the markets reacted with relief to the initial announcement, minds have already started focusing on the ambiguous nature of the rescue deal. Though one thing is for sure, the contagion effect of Greece's debt problems has quickly become Van Rompuy's biggest test as the EU President to date

Bank of America Merrill Lynch global shares strategist Michael Hartnett said the Greek government debt crisis is beginning to look like a re-run of the Asian crisis of the the 1980s.

He said there has been little to suggest that policy heads have any way of improving credit risk in Greece or the other debt ridden European nations. “In our view, it seems like the 1998 Asia crisis in reverse: Thailand...Indonesia...Korea...Russia has this time become Iceland...Dubai...Greece…”

He said twelve years ago, the ripple effect from Thailand all the way to the collapse of hedge fund Long-term Capital Management ultimately led the Federal Reserve to ease and that ultimately led to the tech bubble.

“Should today's European sovereign risk crisis ultimately lead to a further bout of liquidity injection, another bubble, this time in BRIC markets or commodities, could occur, in our view”' he said.