BRUSSELS – European leaders’ debt plan for Greece was what markets had been hoping for, but it doesn’t spell the end of the crisis.

Analysts called Thursday night’s deal a decisive step forward as it makes the region’s rescue fund able to quickly lend money, rather than wait for crises to erupt, and is supposed to reduce Greece’s debt burden instead of just buying time with loans.

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German Chancellor Angela Merkel, right, is seen after a meeting with Greek Prime Minister Giorgos Papandreou, center, and French President Nicolas Sarkozy prior to a summit on Europe’s financial crisis in Brussels on Thursday. The Associated Press

Still, experts warned that Greece may need further help to handle its loans. The broader eurozone, meanwhile, faces years of paying down high government debt, shaking up weak economies and answering hard questions about how much member countries should have to pay for each others’ poor finances.

“We seem to have been pulled back from the abyss,” Simon Ballard, senior credit strategist at RBC Capital Markets, said Friday. “Eurozone Armageddon does thankfully seem to have been avoided.”

But political leaders “have not delivered a silver bullet to the sovereign debt situation.”

This week’s deal takes huge pressure off markets in the short term by avoiding a messy debt default by Greece that could spread market turmoil as did the 2008 collapse of U.S. investment bank Lehman Brothers.

Instead, Greece’s voluntary debt workout should lead to a manageable and temporary ruling of default, from which the country should emerge with lower debt, cheaper borrowing rates and a better chance of paying its way.

The deal also pushes Europe’s finances closer together by allowing the eurozone rescue fund to preemptively give loans to countries experiencing early signs of trouble.

On the one hand, that will boost confidence that weak countries like Spain will not see the same market nosedive that pushed Greece, Ireland and Portugal to need bailouts. That hope was reflected in markets, where borrowing rates for Spain and Italy slumped sharply and stocks and the euro rallied.

On the other, critics say the fund’s new powers will make profligate countries less responsible by sharing the financial responsibility for bad policies and government overspending.

Some in Germany — effectively Europe’s bankroller — disparagingly call it a “transfer union.”

“Monetary union has now become even more of a transfer and liability union,” said Joerg Kraemer, chief economist at Germany’s Commerzbank. “This creates incentives for unsound budgetary practices in the long run.”

Germany’s Chancellor Angela Merkel, French President Nicolas Sarkozy, European Central Bank head Trichet, and 15 other governments cleared away their differences after market fears began spreading from the three bailed-out countries — a relatively small 6 percent of the eurozone — to much larger Spain and Italy. The possibility that rising bond market yields would sink those two country’s finances helped break a weeks-old deadlock.

Merkel won a key concession to public opinion in Germany: sacrifices from bondholders, who will take longer to get their money and receive lower interest under a program worked out with representatives of the financial services industry.

Germany in return yielded by agreeing to lower interest rates on eurozone bailout loans to the three countries, and on giving the eurozone’s bailout fund wider-ranging powers.

The $633 billion fund can now loan money to recapitalize banks anywhere in the eurozone, buy government bonds on the secondary market, loan Greece money to buy back bonds, and backstop countries quickly before market tensions get out of control.

But while that will ease market turmoil, it will not materially change the grim financial reality of many European countries.

Three countries — Greece, Portugal and Ireland — remain financially prostrate, dependent on aid from their eurozone partners and the International Monetary Fund.

Beyond them, much larger Italy has huge debts of 120 percent of gross domestic product and chronically weak growth. Spain’s economy remains in tatters with unemployment of 21 percent after a collapsed real estate boom.

Austerity programs are being forced through almost all EU countries. Beyond the bailout recipients like Greece, where the cuts have been so savage as to cause regular violent protests, larger countries like Spain, Italy and even Germany are also painfully slashing spending.

European governments are cutting public sector salaries, pensions and jobless benefits. Faced with falling incomes, households are expected to spend little, particularly on big items like housing.

Against that economic backdrop, it will be crucial to keep governments’ financial policies in line. The European Commission, the EU’s executive, hasn’t finalized a deal with the European parliament on whether to impose automatic discipline on budget sinners who are clearly on the wrong fiscal path.

The parliament wants to toughen the commission’s proposal, which leaves the decision in the hands of political leaders — the same people who failed to get tough on Germany and France when they overspent in previous years and then watered down the rules.

Bigger ideas include a eurozone finance ministry that could veto spending by national governments, and a eurozone debt agency that could issue bonds in the name of all the countries together — meaning the thrifty would pay higher rates and the profligate would see their borrowing costs fall. There’s no agreement there either.

“While this is by no means the resolution of the crisis, it does mark a decisive step forward, and there is a feeling that European policymakers may have finally got ahead of the curve and bought themselves time,” said Howard Archer at IHS Global Insight.

“Long term, of course, the key issue remains improving the competitiveness of not only Greece, but of all of the eurozone’s weaker performing economies, including Italy and Spain.”

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