EU leaders have agreed to use the eurozone’s planned bailout fund to directly support struggling banks, without adding to government debt.
After 13 hours of talks, they also agreed to set up a joint banking supervisory body for the eurozone.
Spain and Italy put pressure on Germany to allow the bailout fund to buy government debt in the markets – a measure to contain borrowing costs.
Eurozone leaders agreed to begin implementing the decisions by 9 July.
However, it could take until the end of the year before the new money becomes available.
Announcing the deal, EU Council President Herman Van Rompuy said it would break the “vicious circle” between banks and national governments.
The euro surged against the dollar in Asian trade after the news from Brussels. Stocks in Germany and London also rose sharply.
The deal also tried to sort out a problem with a previous agreement to lend money to Spain’s banks. There had been confusion over where that money would come from, and which lenders would have priority in the event of a default.
Nothing mentioned the harder conditions for Greece, but it’s only the start of much bigger Spanish and Italian bailouts or a complete collapse. if Germany tries to absorb just Spain and Italy debt, then Germany will become like Greece. They are adding debt, but today at least have shuffled some of it on Germany, A lot more to come!
Have a nice day all!