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>> union bank has put its financial strength to work for a wide range of companies, from small businesses to major corporations. what can we do for you? >> and now, "bbc world news." >> european markets deliver their verdict on a deal to tackle the eurozone crisis. they like it. leaders across the european union agree on cutting the greek debt and raising the bailout fund to a trillion euro. thousands of people flee the thai capital of bangkok after warnings that large parts of the city could soon be under water. welcome to "bbc world news." i'm david eades. also coming up in the program -- is south africa's opposition party about to elect its first black parliamentary leader?

>> hello. european markets have reacted positively to the deal announced by eurozone leaders to talk the bloc's huge debt crisis. the agreement reached after late-night talks in brussels and means that private banks holding greek debt will accept a 50% loss. banks will also be forced to raise more capital to shield them against any government default. and a mechanism has been approved to boost the eurozone's main bailout fund to $1.4 trillion, effectively a trillion euros. the eurozone leaders also announced tougher controls on member countries' budget and a new leadership structure. let's go over to brussels now and the bbc's jon sopel. >> hello and welcome to brussels. well, they pulled it off. at about 4:00 this morning, an agreement was finally reached between the 17 eurozone countries that would put in place a deal to hopefully bring these economies back from the

brink after the debt crisis that has seemed to paralyze the continent and paralyze the political leaders. but they did reach an agreement on recapitalizing the banks. they did reach an agreement on what sort of writedown there should be on greek debt. they did reach agreement on how much the bailout fund should be bolstered. but it was a long and tiring night. let's get this report from our europe correspondent, chris morris. >> in the early hours of the morning, a deal was finally done. with angela merkel warning that europe is facing its most difficult situation since the second world war, outright failure was not an option. but, as ever, the markets will pick up the scene of what's been decided in order to test its strength. >> there is a very solid fear, private sector involvement agrees. there is a bank recapitalization program that is agreed by all members of the european union, and there is

this european financial stability fund that is duly leveraged and which will constitute a good basis from which to strengthen the defense of europe against contagion. >> many of the precise details will have to be worked out over the next few weeks, but eurozone leaders are already hailing a decisive plan. >> i believe the result will be greeted with satisfaction by the whole world that we're expecting strong participation from the eurozone. >> there are also promises to focus more on economic growth and on measures to improve the economic governance of the eurozone. everyone knows there is far more work to do, that this is perhaps the minimum which was required, but there's also some hope that a corner may have been turned. >> the fact that we are still here today is a big achievement for the greek people. so, today, i think we can close

a chapter. i think we can now stop with all our strength to start working on a new future for our country. >> i am aware, and everybody was aware, that the whole world was looking at this meeting, that the world wanted to see that we could stand the test of this deep economic crisis, and i think that tonight we europeans have shown that we have made the right decisions. >> a word of caution -- back in july after a similar summit, a deal was unveiled which was described as a big step forward for the eurozone, but it began to unravel within weeks. this is much broader and far more ambitious, but it needs to be, because the challenges facing the eurozone with contagions to major economies like italy have grown steadily more severe. chris morris, bbc news, brussels. >> well, the european parliament is meeting at the moment, and the european commission president, jose manuel barroso, has been giving

his reaction to the agreement hammered out last night. >> mr. president, president of the european council, honorable members, following along with the meeting that just concluded a few hours ago, i am pleased to stand before you this morning and confirm that today europe is closer to resolving its economic and financial crisis and to getting back on fast growth. euro summit took solid and substantial steps that should enable europe to turn the corner. ahead of european council, commission demanded a comprehensive approach. we insisted that different aspects of the crisis should be tackled together and not in a piecemeal fashion. i presented a proposal to you on 12 of october and also sent to government at the same time. this road map was very large

supported by this parliament. i thank you for this. and i am pleased to inform you that five elements have been comprehensively addressed at this european council and summit. we know that the agreement are not an end point. they mean the beginning of a long part of hard work. but today we have a more ambitious platform on which to build europe's future growth. let me take the element briefly one by one. first, on greece. this included a credible and proper degree of private sector involvement. this will ease market pressure on greece and allow the country to continue its programs of reform. we are determined to conclude work on the second financial assistance program by the end of this year. second, the agreement on the leveraging of the efff means that we have also maximized the

potential of our backstops. the mix of providing credit enhancement and maximizing fund arrangement will increase the leverage's effect up to five -- up to four or five times. it increases the credibility of our firewall and it is the single most crucial element of our resolution efforts, the element that has all our other action. third are the banks. decisions taken yesterday by member states pave the way for a restoration of confidence in european banking sector. we are working to design this for medium and long-term funding of banks while also requiring banks to hold a significantly higher capital ratio after taking account of sovereign debt. the commission will continue to work hand in hand with european

banking authority, the e.c.b., and they will implement these measures to a fully coordinated approach at european union level. i am also pleased that italy has given its strong commitment for the sake to further the reforms. this is confirmed not only in a letter that the president of the counts council of minister of italy sent to the president and myself, but also in the very clear conclusion endorsed by all heads of state and government of euro area. it is now imperative that italy implement its commitments fully and according to a clear time table. the commission is interested in the responsibility to monitor these efforts. honorable members, this is where we stand on the most urgent issues. i believe the decisions gives us a solid platform from which to continue our work. i'm also pleased that the summit conclusions highlight

the role of the community matters and of the commission in economic governance. in fact, we build on the measures by strengthening the commission's role monitoring budget. but we will now go beyond the legislation recently adopted by these parliaments. the commission is committed to a union. today i can announce to you that next month we'll present a comprehensive package on further deepening european union and euro-area economic governance. this will include namely -- a decision regulation linking assistance according to the treaty. a further co-decision regulation on deeper fiscal

also based on article 136 of the treaty. so far, you decide on the basis of our proposal. >> ok, well, let's leave it there. jose man you're we will barroso speaking a few moments ago. i'm joined by the bureau chief for the "financial times" here in brussels, and our business correspondent here in brussels as well. now, you had a chance to look at it. i think you got reaction from people from the negotiations. what do you make of it? >> i think we got to be very careful before we call this the final deal. there's still negotiations going on to finalize the final part. they got their top-line number they wanted. they got the 50% hard haircut. they haven't worked out how it's actually going to occur. the general way to describe it is, you're going to have a person with a 100 euro bond, and i'm going to swap it way for a 50 euro bond. well that she looks very good on paper. but if i get the bond and i get 5%, 6%, 7% interest rate on

that this year. that's that's actually worth mother the 100-year bond. what the heads of state wanted is the top-line money so they can go and say, look, we're tough on the banks. i met with the bankers this morning. they don't seem particularly upset by this, and they're actually rather happy with the way things go. they preserved their envelope is what they said. i think they're not all that upset with the way things are going. the other issue on the bailout fund, increased firepower, they talked about four to five times leveraging, so maybe we'll get to a trillion. those numbers are still up in the air. they still have no idea what the real leveraging is going to be. everyone says about a trillion euros, sounds like what it could be, but we have no idea now, because we don't know the size of the assets they're going to base that on. i must say, i think we still have to watch this, and i think the market is going to watch. >> peter, you seem to be saying almost there's less to this than meets the eye. >> i think that's exactly right. i think i'm going to be fair. on the issue of the bank recapitalization, there's a lot more reality there. they got to the 106 billion in

bank recapitalization that needs to be done. what's counted as capital, there's fudging there, but not a whole lot. as the night went on, you saw they were just having a very hard time putting firm numbers on these things because they were trying to do it in a rush. we had a deal that almost stalled at midnight. you had the chancellor of germany and the president of france walking in to negotiate this deal. they really, really wanted a top-line number, and we won't know how good a deal is until the final details are worked out, and that could be days, if not weeks away. >> for the moment, i would imagine the eurocrats are going, phew! >> absolutely. you have to say the initial reaction is it could have been an awful lot worse. what's slightly unusual about this summit is the leaders haven't made that bad a job of managing expectations. we did not get the situation of thinking that the end of the problem was in sight. expectations were sort of gently let down in the days before the summit, and in the end, they came up with some

numbers. they weren't terribly hard numbers, but they were numbers you could write down on a piece of paper, and that was somewhat better than financial markets expected. so that's given a little bit of relief. let's see how long it lasts before they see what the reality underneath it is. >> perception is reality. is it the same in economics? because presumably if there is less to this than meets the eye, and they're not taking such a haircut, then there's still a big debt problem for greece. >> well, it certainly had -- let's be fair, at this summit for the first time really since they started tackling this crisis 18 months ago, they are focusing on the real issues. the real issues are greece cannot sustain its debt. we need a big rescue fund, and we need to do it -- they are actually finally dealing with three big issues. in fair tons them, they are dealing with this, but this is actually a confidence game. this has always been about market confidence and do they believe europe's leaders so that the markets will calm down?

fundamentally, look at italy. it's actually not in that bad of economic shape. it has high debt numbers, but japan's got worse, and it borrows at 2%. not that bad. the problem is they don't trust berlusconi or european leaders to shore uppity lee. it's all about restoring confidence. it's all about perception. it's more a political crisis than an economic crisis. and if they could bring confidence back that they're looking to tackle these issues, that in and of itself may reassure the markets. >> it will make the g-20 a little easier. >> yes, i suppose it will, also make it quite exciting. one of the things the eurozone leaders are going to be asking for is a little bit of help from the likes of china, russia, brazil. there will be a delicious air near there. also worth mentioning, the unmentioned actor in all of this is the european central bank. there's an awful lot of people who think that the e.c.b. is the one player that's really capable of bringing the financial firepower to the table. germans hate the idea of it, but one reason they've taken

comfort so far is they've had indications from the next head of the e.c.b. that they are going to provide support by the back door, but i think the markets would like it a lot better if there was some explicit role for the e.c.b. that they could rely on for some months. >> ok, very, very good. thank you very much indeed for taking us through that. let's get that reaction from the city, from the market. let's join nigel cassidy from the trading floor. >> certainly a lot that have relief you've been talking about directly expressed here. quite a few smiling faces on the trading floor, more opportunities to do deals. i think it's just relief that the gains seen in asia are immediately after that three-pronged announcement from brussels. it's all been carried on here. certainly we've got the ftse 100 up 2%, and markets are doing quite well in the rest of europe. this is the chief european

economist. >> yes, it's looking like a positive reception. i would say if you ask me at 2:00 last night, it wasn't looking quite so clever for european leaders. there's a lot of relief this has actually been pulled off. in many ways, there's still an important deal missing here. when i think markets have digested the fact things haven't come off the rail, there's a lot that's still uncertain, particularly how are they going to bring in external investors to support the bond. >> yes, our colleagues were talking about that in brussels. let's explore it a little bit more. this trillion pound headline figure includes cash potentially from china and brazil. how does that work? >> well, it's unspecified where it comes from. what we do know is you do need external cash to make that hang together, and they've got different mechanisms for making that work, but actually they haven't told you how they're going to be designed or what people are going to sign up for them. but surely, one of the plans is to get members of the g-20, in

particular the big markets like china and perhaps brazil to sign on to some sort of financing deal for europe. they're not going to solve the problem for europe, but the fact they might have confidence in the european bond markets would be an important factor in the next week. >> all those bankers were talking about terrible dire things that would happen if there was a 50% writedown of greece's debt. now it's happened. people -- >> i think a lot of us have said that it will be better to work out what the way to get greece on a stable footing was rather than pretend that 20% would be enough. and i think many of those bankers were involved in those negotiations and have been looking for the same thing. in the end, is 50% enough? it's certainly helpful that you get a 50% haircut on the private debt, but also very important that the i.m.f. is stepping up to the plate here and, with the e.u., going to provide a new program. >> that's jens larsen, the chief economist from royal bank of canada. so far, the relief rally is on. >> nigel cassidy there in the

city of london. thanks for being with us here on "bbc world news." we've got more on that eurozone deal to come, of course, but also -- some signs of relief in greek political circles. what are people saying there? we'll be live in athens. >> flooding has hit several parts ofity lead. five people have been killed, eight missing, buildings and roads ared. there's a huge clean-up operation underway in the northern provinces of advertise canny -- in tuscany. >> the force of the flood is plain. there's a trail of wreckage across this part of northern italy, homes smashed, cars destroyed, towns filled with mud. from the air, the extent of the damage to roads and bridges is plain. river banks washed away,

valleyed choked with debris, the tasks facing the emergency services immense, not even basic services are functioning. >> the biggest trouble is we have no water, and there's nothing we can do. all the houses are flooded with mud. >> almost 90 millimeters of rain over three inches fell in just a few hours on tuesday, affecting most of italy from the alps. but along the coast, steep valleys funneled the water into huge torrents which pummeled their way to some of the most beautiful places in the country. some villages remain cut off by land slides, hampering rescue efforts. with several people still missing, the italian military has been drafted in to help. the task facing clean-up teams is both enormous and grim. >> a former goldman sachs

director has pleaded not guilty in court to charges of insider trading. he's been freed on $10 million bail pending his trial. he's accused of aiding a billionaire fund manager, raj rajaratnam, who was found guilty of insider trading. he's facing a long prison sentence and high fines if found guilty. >> you're watching "bbc world news." european stock markets have risen after european leaders worked late into the night to agree on a plan to cut the greek debt mountain and deal with the wider financial crisis. what sort of impact has that had within greece itself? i'm joined by the chairman of the athens chamber of commerce. thanks very much for joining us. a 50% cut for you effectively, the banks taking on 50% of those debts. is that enough?

>> first of all, we have to be very careful, because let's not forget, the devil is in the details. we don't want the reputation of took a first of july agreement. we have to wait to actually see the technical details of this announcement. because, after all, there's two issues. one is the technicality, as i said. and secondly, it's the political issue, because it will be very difficult for the government to be able to explain why, after almost 10 years in 2020, we will be back at 120% against the g.d.p. in terms of debt, which was exactly the percentage that was enforced when they took over back in september of 2009. >> right, but surely the point now is, looking ahead, you've got banks saying reluctantly we're going to take a hit of 50% of what we feel we're owed from greece. do you think now that the greek economy can deal with the size of debt that is left behind?

>> well, definitely at the moment, the level of debt that we have is not serviceable. on the other hand, you mentioned the banks. however, they haven't come out with a confirmation that the banking sector agrees to see this on a voluntary level. so these are the technicals we have to look at in the next few days, and it has to be confirmed that this will be a voluntary participation in the scheme that was announced late last night. >> right. i mean, i suppose it's up to people like that who will be trying to push growth again for greece once more. has the deal in brussels -- i accept we don't know all the details, but has that broadly gin you a sense of impetus?

>> well, i would at first glance say yes, but i fear the worst banking liquidity is concerned. the the mane problem of the greek company over the last 18 months is exactly this liquidity crunch, and if this continues the next six months, it will be very, very severe because they've already taken the brunt of this recession. and i think it's not only a depreek problem, it's an overall european problem when the main two political leaders have to decide what will be done with the european banks, because i have to remind our viewers that the percentage of leverage, or the leverage of the european banks or prime banks is absolutely colossal. >> sorry to interrupt you, thank you very much. we're going to have to leave it there, because we're going to have to get other responses. but the chairman of the athens

chamber of commerce with his perspective there. i think it's worth bringing in a view we've got from the newspapers. the deal itself done after their deadline, but they all have online editions as well, so let's just have a look at what they're saying as well. "the times" saying the deal has been sealed, the subsequent surge in the markets being reached. that's the view on it. they talk of the stock exchange openly strongly following that agreement, all of which we've seen for ourselves. and the german tabloid, chancellor merkel being hailed as triumphant in brussels. and another says the big spanish banks are to outline their need for capital in the wake of this european deal. let's get back to greece for a moment. let's hope a new and better day dawns as the prime minister george papandreou says he hopes greece's debt burden will be sustainable. and we've heard some skepticism from the athens chamber of commerce in the last moment or

two about that. some other stories we need to bring to you this hour -- thousands of people are fleeing the thai capital bangkok after the government warned that large parts of the city could soon be inundated by floodwater. a five-day holiday has been declared in the worst affected regions. rachel harvey has the story. >> i know it's fair to say that anxiety has been rising in line with the floods. the water keeps rising, increasing deeper into the capital, and as it does, people look on nervously. those who can are in large numbers now heeding the authorities' advice to get out of the city, at least for the next few days. this special holiday has been declared for flood-affected provinces only, but that is 27 provinces, including bangkok. so those who can are trying to get out of town. but there are plenty of others who are choosing to stay or have no where else they feel they can go, and they've been stock up on provisions. we've seen a steady decline in basic food stuff like canned

foods, but also bottled water. the government says it is trying to import more supplies, but there are distribution problems as well as trying to sort those supplies in the first place. >> rachel harvey. go to the website, you'll get breaking news on south africa's main opposition. >> funding was made possible by the freeman foundation of new york, stowe, vermont, and honolulu. newman's own foundation. union bank. and shell. >> this is kim - about to feel one of his favorite sensations. at shell, were developing more efficient fuels in countries like malaysia that can help us get the most from our energy resources. lets use energy more efficiently. lets go.

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