The Associated Press: EU agrees new debt plan, but near-term help needed

EU agrees new debt plan, but near-term help needed

BRUSSELS (AP) — Even though EU leaders have agreed on a new rescue system for future debt crises, rating agencies' increasingly pessimistic view on some euro nations' ability to handle debts added pressure Friday to come up with more short-term measures to ease the crippling market turmoil.

EU leaders decided not to beef up the their existing bailout fund at a summit in Brussels, as they wrap up a punishing year that has rocked the world's confidence in their ambitious experiment to share a currency.

Markets seemed somewhat relieved by the one financial decision the EU leaders have made at this summit: to change the treaty that underpins their bloc to allow for a permanent rescue plan for countries that get buried in debt beyond 2013. Stocks and the euro rose slightly in European trading Friday morning, despite worries that the move doesn't do enough to deal with the current debt turmoil.

Rating agency Moody's Investors Service downgraded Ireland's government bonds by five notches Friday, citing the country's ailing banking sector, which was the main cause for a massive bailout from the EU and the International Monetary Fund last month. The downgrade follows warnings over the ratings of highly indebted Spain, Greece and Belgium earlier this week.

EU leaders Thursday night said they would do "whatever is required" to safeguard their common currency. But they stopped short of introducing new showstopping measures, such as boosting the size of the eurozone's existing euro750 billion ($992.85 billion) bailout fund or introducing pan-European bonds to ease vulnerable states' borrowing costs.

The heads of state did agree on tweaking the bloc's central treaty to allow them to set up a new tool to deal with debt crisis among the 16 countries that use the euro after 2013, when the existing bailout fund expires.

EU governments had decided to set up the so-called European Stability Mechanism at their previous summit in October and finance ministers outlined its broad features at the end of November.