Italy and Spain have lifted their objections to a deal on measures to promote growth reached at an EU summit. They had withheld their approval to back up demands for action to reduce their borrowing costs.
European Union leaders meeting in Brussels agreed early on Friday to a set of measures aimed at bringing down borrowing costs for member states Italy and Spain.
Italian Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, had refused to sign off on the 120-billion-euro ($149 billion) growth package being debated on Thursday unless the other EU leaders met their demand for swift action to reduce their countries' high borrowing costs.
"The process was tough. The outcome was good," Monti told reporters after more than 13 hours of negotiations.
The compromise, unveiled by European Council President Herman Van Rompuy in the early hours of Friday, is meant to do just that.
It would allow countries to use the eurozone's permanent bailout fund to recapitalize their debt-ridden private lenders without adding to their mountains of sovereign debt. This should benefit Spain in particular.
The accord also includes a provision that would allow the bailout fund to be used "in a flexible and efficient manner in order to stabilize markets." This is specifically meant to bring down borrowing costs for countries like Spain and Italy.
'A breakthrough'
'A breakthrough'
Spain saw its yields for 10-year bonds hit 6.9 percent on Thursday, just below the seven-percent mark, which is widely seen as unsustainable.
Speaking after talks that dragged on through the night, Van Rompuy described the deal as a "breakthrough."
He said the leaders of the 17 countries that use the euro had agreed to set up a joint banking supervisory body and that all 27 EU leaders had agreed to a long-term plan for a tighter budgetary and political union.
Observers said it appeared that German Chancellor Angela Merkel had to be persuaded to drop her insistence that any bank recapitalization funds be channeled through the governments of any member states in question. On the other hand, she appeared to have won out with her demand that any increased collective liability be combined with financial sector reforms.
"We stayed true to our philosophy that there has to be a give and take," the chancellor said as she arrived for the final session on Friday.
pfd, ncy/msh (AP, Reuters, AFP, dpa)
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