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World stocks rally on Greece plan, China By Aaron Smith June 24, 2011: 8:13 AM ET

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June 24, 2011 – Comments (0) | RELATED TICKERS: SPY , QQQ , VXX

NEW YORK (CNNMoney) -- World markets rallied Friday after the so-called Troika - the European Commission, the International Monetary Fund and the European Central Bank - reached an agreement with Greek authorities on a belt-tightening plan for the economy.

An op-ed piece by China's premier saying his nation is balancing growth and keeping prices are under control contributed to the rally.

London's FTSE and the DAX in Frankfurt rose about 0.7% in midday trading, while the CAC 40 in Paris gained 1%.

Asian markets finished with even greater gains. China's Shanghai Composite rose more than 2%. The Hang Seng in Hong Kong rallied about 2% and Tokyo's Nikkei gained nearly 1%.

The European Commission said the Troika and Greek authorities reached a "satisfactory agreement on a set of measures to close the fiscal gap for the years 2011-2014."

The austerity plan still has to be approved by Greek parliament, where politicians are well aware that the measures implemented last year have helped to stagnate the economy. They've contributed to a surge in unemployment to 16.2% from 11.6% in March 2010, according to Marko Mrsnik, the lead analyst in the Standard & Poor's downgrade of Greek debt on June 13.

For Greece, the real challenge is still ahead

"The Commission is looking forward to the voting of both legislative bills next week in the Greek Parliament," said the Commission in a statement. "These measures, once fully implemented, will enable Greece to meet the agreed targets and remain on track."

The Greek Parliament must approve the painful reforms, on top of the austerity measures that have been in place since last year, to win the last $17 billion of a $156 billion bailout package from other European nations that was granted in 2010. The new austerity measures would also clear the way for another potential bailout package to keep Greece functional going forward.

The parliament is scheduled to vote on June 28. This will be followed by a meeting of European Union finance ministers on July 3 to approve the final tranche of funding from last year's package.

The European Council welcomed progress in Greece, but in a cautious tone, recognizing that the austerity measures still had to clear final hurdles with the Greek authorities.

"A comprehensive reform package agreed upon with the Commission, in liaison with the ECB and the IMF, and adoption by the Greek Parliament of the key laws on the fiscal strategy and privatization must be finalized as a matter of urgency in the coming days," said the Council, in a statement.

The new austerity measures would include reductions in the pay of public workers and an increase in the attrition of public jobs, placing further pressure on Greek workers and fanning the flames of violent protests that have occurred in Athens in recent weeks.

This is in addition the measures implemented in 2010: pension cuts; a sales tax boost; excise taxes on fuel, cigarettes, alcohol and luxury goods; tougher eligibility for disability benefits; and a hike in the retirement age to 65 from as low as 61.

The pain of the Greek debt crisis

Chinese premier Wen Jiabao, in an op-ed piece in the Financial Times, outlined the stimulus measures that China has taken to maintain growth and advance economic reform

He also said controlling inflation is a high priority for the world's largest nation.

"There is concern as to whether China can rein in inflation and sustain its rapid development," Wen wrote. "My answer is an emphatic yes."

The premiee also emphasized the need for economic coordination on a global level: "We should welcome the fast development of emerging economies, respect different models of development, increase help to least developed countries to enhance their capacity for self-development, and promote strong, sustainable and balanced growth of the global economy."

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