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Eurozone agrees to use bailout funds for bank recapitalisation

Reported by Metro.co.uk on Friday, 29 June 2012 (on June 29, 2012)

*Leaders of the European Union have agreed to use their bailout fund to give direct aid to struggling banks, rather than using it to add to government debt.*

European Council President Herman van Rompuy called the agreement a 'breakthrough' for the Euro (Picture: Reuters)

The agreement was made among leaders following hours of talks in Brussels, with plans also drawn up to set up a joint banking supervisory body for the eurozone.

Leaders said they would begin implementing the new moves by July 9, although the new funds may not be available until the end of the year.

European Council president Herman van Rompuy announced the deal, calling it a 'breakthrough' for the single currency.

'We are opening the possibilities for countries that are well-behaving to make use of financial stability instruments, in order to reassure markets and get again some stability around of the sovereign bonds of our member states,' he said.

The announcement saw the Euro rally against the dollar in Asian trade, while stocks in London and Germany also rose following the news.

The deal was also aimed at sorting out the problem of the agreed bailout loan to Spanish banks, following confusion over how the funds would be sourced and which lenders would have priority if there were a default on the loan.

The agreement will see a joint supervisory body for the eurozone created (Picture: Reuters)

It is believed the deal was finalised after German chancellor Angela Merkel gave in to pressure from Spanish and Italian leaders to provide more support for eurozone nations.

The leaders of both those countries were also supported by the new French president Francois Hollande.

David Cameron said ahead of the summit that there had been growing frustration among leaders of the 17 eurozone nations over reaching a deal which would stabilise the single currency.

'I know people are frustrated these decisions keep happening and not enough decisions are made,' he said.

'These are hard decisions for eurozone countries to make and we should be encouraging them to go ahead.'

A report outlining the plan in detail will be presented at the next EU summit in October.

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