Europe debt crisis progress seen

The euro gained Wednesday as Europe appeared to make progress on two fronts to resolve its debt crisis.

At mid-afternoon, the euro was trading at $1.38 US, a gain of 1.3 per cent.

The European Union Wednesday unveiled a long-awaited comprehensive plan for dealing with the regions debt crisis.

And Slovakia's main political parties reached a deal to approve changes to an EU bailout fund this week,

"Slovakia will ratify the EU bailout fund without any problems. I believe it will happen on Friday this week at the latest," said Robert Fico, the main opposition leader.

His comments came just one day after the Slovak parliament rejected the proposal, causing the government to fall, because Prime Minister Iveta Radicova had tied the vote to a confidence vote. The deal provides for early general election on March 10.

The centrepiece of the EUs crisis plan would force Europes biggest banks to raise billions of euros in capital to protect themselves in the event a default by debt-burdened countries forced them to lower the value of their loans to those countries.

European Commission president Jose Manuel Barroso also warned Wednesday that key banks should not be allowed to pay out dividends or bonuses until they have shored up their cash reserves.

Plan goes before EU summit Oct. 23

Investors fear the banks might restrict lending and throw the 17-nation eurozone into a new recession.

Barroso also suggested the EC would provide continued support for Greece, a more effective use of the resources of the eurozone bailout fund, and bigger powers for the Commission to control national budgets.

The EU's executive hopes the bloc's leaders will embrace its suggestions at a crucial summit on Oct. 23.

European markets surged after Barroso's proposals, continuing a weeklong rally triggered by hopes that the eurozone may finally get a grip on the worsening debt crisis.

London's FTSE 100 index closed with a gain of 0.85 per cent, Frankfurt's DAX was up 2.21 per cent and the Paris CAC 40 finished ahead 2.42 per cent.

The new rules would also require systemically important banks to implement new international rules on bank capital much earlier than 2019, as was initially foreseen.

That means the continent's biggest banks have to bolster the financial pad they maintain to absorb losses to about nine per cent of their loans, investments and other risky assets, a person familiar with the matter told The Associated Press, compared with the five per cent to six per cent they needed to pass this summer's stress tests.