Eurozone leaders reach deal on cash for struggling banks
Source: Agencies |
June 30, 2012, Saturday
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AFTER 18 disappointing summits since the start of the debt crisis, Europe's leaders yesterday appeared to have finally come up with a set of short-term measures and long-term plans that show they are serious about restoring confidence in their currency union.
Leaders of the 17 countries that use the euro agreed they will let funds intended to bail out indebted governments funnel money directly to struggling banks as well. They said the move will "break the vicious circle" of bank bailouts piling debt onto already stressed governments.
European Council President Herman Van Rompuy called it a "breakthrough." Global stock markets and the euro rallied hard.
The decision is a victory for Spain and Italy, whose borrowing costs have risen to near unsustainable levels.
In Germany, Chancellor Angela Merkel is likely to face a grilling from a skeptical German parliament. Heading into the summit, Merkel had stuck to her line that any financial help from Europe's bailout fund must come with tough conditions, so a separate decision allowing countries that have reformed their economies easier access to bailouts, without such stringent conditions, was widely seen as a defeat by the German press.
Merkel insisted the funds would still only be released when it was clear countries were undertaking serious reforms.
"We remain completely within our approach so far: help, trade-off, conditionality and control, and so I think we have done something important, but we have remained true to our philosophy of no help without a trade-off," Merkel told reporters in Brussels.
Van Rompuy dismissed talk that Merkel had lost in the negotiations. "You can't summarize this in winners and losers," he said.
In addition, the leaders of the eurozone countries authorized the EU bailout funds to buy bonds of countries to reduce the interest rates the markets charge.
Leaders of the full 27-member European Union, which includes non-euro countries such as Britain and Poland, also agreed to a long-term framework toward tighter budgetary and political union.
One key factor in negotiations was that French President Francois Hollande appeared to turn against Merkel and lobbied instead on behalf of the southern states frustrated at the failure of austerity measures to solve their problems.
Germany and France have been the traditional drivers of European policy, but Hollande and Merkel differ over how to tackle the crisis.
Hollande declined to take credit. "No one can say I won or I lost," he said. "What was at stake was Europe. That's who won."
Leaders of the 17 countries that use the euro agreed they will let funds intended to bail out indebted governments funnel money directly to struggling banks as well. They said the move will "break the vicious circle" of bank bailouts piling debt onto already stressed governments.
European Council President Herman Van Rompuy called it a "breakthrough." Global stock markets and the euro rallied hard.
The decision is a victory for Spain and Italy, whose borrowing costs have risen to near unsustainable levels.
In Germany, Chancellor Angela Merkel is likely to face a grilling from a skeptical German parliament. Heading into the summit, Merkel had stuck to her line that any financial help from Europe's bailout fund must come with tough conditions, so a separate decision allowing countries that have reformed their economies easier access to bailouts, without such stringent conditions, was widely seen as a defeat by the German press.
Merkel insisted the funds would still only be released when it was clear countries were undertaking serious reforms.
"We remain completely within our approach so far: help, trade-off, conditionality and control, and so I think we have done something important, but we have remained true to our philosophy of no help without a trade-off," Merkel told reporters in Brussels.
Van Rompuy dismissed talk that Merkel had lost in the negotiations. "You can't summarize this in winners and losers," he said.
In addition, the leaders of the eurozone countries authorized the EU bailout funds to buy bonds of countries to reduce the interest rates the markets charge.
Leaders of the full 27-member European Union, which includes non-euro countries such as Britain and Poland, also agreed to a long-term framework toward tighter budgetary and political union.
One key factor in negotiations was that French President Francois Hollande appeared to turn against Merkel and lobbied instead on behalf of the southern states frustrated at the failure of austerity measures to solve their problems.
Germany and France have been the traditional drivers of European policy, but Hollande and Merkel differ over how to tackle the crisis.
Hollande declined to take credit. "No one can say I won or I lost," he said. "What was at stake was Europe. That's who won."
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