World stock markets rose in trading today after European Union leaders agreed a three-part deal early designed to stem the euro zone debt crisis.

The euro hit a seven-week high and stock markets 12-week highs after officials in Brussels said agreement had been reached with banks on a 50 per cent write-off of Greek debt and a mechanism to boost the euro zone’s main bailout fund to €1 trillion.

When coupled with an earlier decision to recapitalise vulnerable banks, the summit delivered on the package it promised.

Major European bourses all closed up significantly higher with the FTSE 100 in London up 2.8 per cent, the German Dax up 5.5 per cent and the French CAC 40 up 6.2 per cent. The Iseq index of leading shares closed up 100.34 points to 2766.38.

Wall Street was also higher in early trading.

After the summit, Minister for Finance Michael Noonan said after the deal Ireland would not be seeking a writedown on its bank debt and would instead seek to re-engineer it in a way that was less expensive.

Mr Noonan said the country's interests would not be served by imposing a haircut on bondholders.

Although Ireland is only mid-way through an unprecedented eight-year cycle of austerity, Mr Noonan said Greece, the first country to receive a bailout, would continue to be far worse off for some time to come.

"If you look at the Greek situation, if you look at the best case scenario... they are looking at another 10 years of austerity programmes. At the most malign scenario they say the Greeks won't be out of trouble until 2027," he said.

Earlier today, Taoiseach Enda Kenny said the deal would not harm Irish interests. He also said the proposed haircut for Greek bondholders was unique to that country, and there was still funding available for Ireland.

EU president Herman Van Rompuy said the deal would reduce Greece’s debt to 120 per cent of its GDP in 2020.

He added that the euro zone and International Monetary Fund would give Athens another €100 billion.

French president Nicolas Sarkozy said the agreement would “give a credible and ambitious and overall response to the Greek crisis”.

The text of summit conclusions refers to the bailout fund being leveraged “several fold” - leaving plenty of scope for jittery markets to question the value of its increased firepower in tackling existing and future economic problems in the single currency area.

The complexity of the deal meant talks between the 17 leaders euro zone leaders – holding their second summit in four days – continued until early this morning.

Key aspects of the deal, including the mechanics of how the EFSF will be boosted and providing Greek debt relief, could take weeks to finalise.

Three months ago, euro zone leaders unveiled another agreement designed to draw a line under the debt problem. It became apparent within weeks that it was inadequate given the depth of Greece's economic problems and the vulnerability of their banks.

The new deal aims to address these problems.

Under it, the private sector has agreed to voluntarily accept a nominal 50 per cent cut in its bond investments to reduce Greece's debt burden by €100 billion, cutting its debts to 120 per cent of gross domestic product by 2020, from 160 per cent now.

The euro zone will offer "credit enhancements" or sweeteners to the private sector totalling €30 billion.

The aim is to complete negotiations on the package by the end of the year, so Greece has a full, second financial aid programme in place before 2012.

The value of that package, EU sources said, would be €130 billion - up from €109 billion in the July deal.

"The debt is absolutely sustainable now," Greek prime minister George Papandreou said after the deal was struck. "Greece can settle its accounts from the past now, once and for all."

EU finance ministers are not expected to agree on the nitty-gritty elements of how the scaled up EFSF will work until some time in November, with the exact date not fixed.

There is also concern about Italian prime minister Silvio Berlusconi's commitment to implementing reforms seen as crucial for restoring confidence in the bloc's third largest economy.

Japan and Canada welcomed the euro zone agreement. China's official Xinhua news agency said the outcome was "positive but filled with difficulties".

Additional reporting agencies