Published: May 10, 2010 11:21 AM EDT

BRUSSELS (AP) - The European Union put up a staggering $1

trillion Monday to contain its spreading government debt crisis and

keep it from tearing the euro currency apart and derailing the

global economic recovery.

Analysts said the huge sum supplied the "shock and awe"

markets had been waiting for for weeks, at least in the short term,

and the euro soared on the news.

European leaders negotiated into the early hours of Monday

before reaching a deal in which governments that use the euro would

join the EU and International Monetary Fund in putting up euro750

billion in loans available to prop up troubled governments.

The European Central bank will buy government and private debt

to keep debt markets working and lower borrowing costs, a crisis

measure dubbed the "nuclear option," while the U.S. Federal

Reserve joined with other central banks in the effort, reactivating

a currency swap program used during the earlier stages of the

financial crisis to ship dollars overseas to be pumped into banking

systems as short-term credit.

Officials acted after ominous slides in world stocks and the

euro last week that raised fears that the debt crisis would spread

from heavily indebted Greece to other financially weak countries

such as Spain and Portugal and beyond, to the point where President

Barack Obama discussed the crisis by phone with German Chancellor

Angela Merkel and French President Nicholas Sarkozy last week.

Policy makers worried it could shake the world economy the way

the bankruptcy of U.S. investment bank Lehman Brothers did in 2008,

making banks fearful of lending to businesses, hammering stocks and

killing off economic recovery.

Many investors, rattled for weeks by the prospect Greece would

default on its mountain of debt, showed relief. The euro climbed as

high as $1.3064, up from the 14-month low of $1.2523 it hit late

last week.

Japan's Nikkei 225 stock average rose 1.5 percent and Hong

Kong's Hang Seng index added 1.3 percent. European markets jumped

higher - major indexes were up more than 3 percent - and Wall

Street was also expected to surge on the open, with Dow futures

also 3.0 percent higher.

There was cautious endorsement from analysts who still feared

the measures may not be enough to save the common currency, which

was adopted by many of the EU's member states in 1999.

"It buys time. We don't know if it will be enough. They're

trying to give the impression that they're still united. They've

bought some breathing space but that's all," said Song Seng Wun,

an economist with CIMB-GK Research in Singapore. "This perhaps

just postpones the inevitable, the euro may have to ultimately give

way, that's the worst case scenario."

Marco Annunziata, chief economist of Unicredit bank, said the

package was one of "overwhelming force and should be more than

sufficient to stabilize markets in the near term, prevent panic and

contain the risk of contagion."

"This is shock and awe, Part II and in 3-D," he said.

Under the three-year plan, the European Commission - the EU's

governing body - will make euro60 billion ($75 billion) available

while countries from the 16-nation eurozone would promise backing

for euro440 billion ($570 billion). The IMF would contribute an

additional sum of at least half of the EU's total contribution, or

euro250 billion.

"We shall defend the euro whatever it takes," EU Commissioner

Olli Rehn said after an 11 hour-meeting of EU finance ministers

that capped a hectic week of chaotic sparring between panicked

governments and aggressive markets.

Officials hope the massive sums will deter currency speculators

from betting on a euro collapse after political posturing and

soothing words failed to convince investors that Greece's financial

implosion could be contained.

Markets had battered the euro and Greek government bonds even as

EU leaders insisted for days that Greece's problems were a unique

combination of bad management, free spending and statistical

cheating that doesn't apply to other euro-zone nations.

Market jitters also partly contributed to a nearly 1,000-point

drop in the Dow Jones industrials last Thursday. The Securities and

Exchange Commission is meeting with heads of exchanges Monday to

discuss how conflicting trading rules may have exacerbated the

historic stock market plunge.

In the end, even longtime skeptic Germany realized Europe had to

show the money after financial attacks on Greece's debt seemed

poised to spread to other weak European nations such as Portugal

and Spain. Fear of default led to investors demanding high interest

rates that Greece could not pay, forcing it to seek a bailout. Many

feared market skepticism would make Portugal and Spain pay more and

more to borrow, worsening their plight.

Spain and Portugal have committed to "take significant

additional consolidation measures in 2010 and 2011," a statement

from EU finance ministers said. The two countries will present them

to EU finance ministers at their meeting on May 18.

"We are facing such exceptional circumstances today and the

mechanism will stay in place as long as needed to safeguard

financial stability," the ministers said.

German Chancellor Angela Merkel said her government would

approve the rescue plan on Tuesday before parliament gave it

"quick but thorough" consideration.

Separately, eurozone leaders on Saturday gave final approval for

a euro80 billion ($100 billion) rescue package of loans to Greece for

the next three years to stave off default. The IMF also approved

its part of the rescue package - euro30 billion ($40 billion) of loans

- on Sunday.

The Fed's move to back the euro defense plan reopens a program

put in place during the 2008 global financial crisis under which

dollars are shipped overseas through foreign central banks. In

turn, these central banks can lend the dollars out to banks in

their home countries that are in need of dollar funding in

so-called swap agreements.

The Fed said action is being taken "in response to the

reemergence of strains in U.S. dollar short-term funding markets in

Europe" and to "prevent the spread of strains to other markets

and financial centers." A "swap" line with the Bank of Canada

provides up to $30 billion. Figures weren't provided for the other

central banks involved. They include the Bank of England, the

European Central Bank, the Swiss National Bank, and the Bank of

Japan.