Eurozone worries row back as EU leaders meet

Although there was little sign of decisive action by EU finance ministers meeting in Poland, the presence of their US counterpart Timothy Geithner applying pressure for a lasting solution put the markets in a positive mood.

Cormac Leech, banks analyst at Canaccord Genuity, said: “People are giving the politicians the benefit of the doubt as the meeting is going on. But if there’s nothing positive coming out of it, we’re setting ourselves up for further declines next week.”

The FTSE-100 index of leading British shares ended 0.6 per cent higher at 5,368.41. US stock markets recorded five straight days of gains with the Dow Jones industrial average up 0.7 per cent in early trading in New York.

The London market was buoyed by the banks, which built on gains made on Thursday following the decision of five top central banks to provide unlimited amounts of dollar loans to the sector, easing one of the concerns driving the recent turbulence in financial markets.

Against that backdrop, Barclays gained 3.4 per cent and Royal Bank of Scotland was up 2.3 per cent. But Lloyds Banking Group surrendered early gains to end 0.2 per cent down.

Greece’s debts stand at about 150 per cent of GDP and the markets are increasingly of the view that, with the Greek economy shrinking, the banks will have to accept they’re not going to be paid back all that they are owed. As a result, the main market debate is what sort of writedown – the so-called haircut – financial institutions who loaned Greece the money will have to accept.

Nothing concrete has yet emerged, but investors appear to have brushed the news that the decision over whether Greece will get its hands on the next batch of bail-out cash will not be taken until next month. Greece effectively runs out of money by the middle of October if it doesn’t get the €8 billion (£6.9bn) loan.

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