Merkel defends compromise deal on eurozone banks
Published: 29th Jun 2012 15:08:59
Germany's Chancellor Angela Merkel says she is satisfied with a deal to help finance debt-laden eurozone countries.
"I think we found a good compromise," she said after all-night talks which saw her come under heavy pressure from Italy and Spain.
A new supervisory body will enable the European Central Bank (ECB) to "keep a very close eye on the banks", she said.
Spain is awaiting a 100bn-euro (£80bn; $125bn) recapitalisation of its troubled banks by the eurozone.
Mrs Merkel said the deal on lending would provide sufficient safeguards for the taxpayers' money used by the EU bailout funds.
The eurozone's bailout fund (backed by taxpayers' money) will be taking a stake in failed banks - risk has been increased”
The EU's existing bailout fund - the European Financial Stability Facility - will provide aid under the current rules until the new permanent fund, the European Stability Mechanism (ESM), is ready to take over. The ESM is due to be launched next month.
The funds will not only be able to lend directly to banks. They will also be used to buy bonds of countries like Italy and Spain whose borrowing costs have soared - with the intention that those countries will not have to apply for a formal Greek-style bailout.
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.
Germany, the biggest economic power in the eurozone, is reluctant to continue bailing out debt-laden countries. Its position is supported by the Netherlands, Austria and Finland.
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 other currencies while European stock markets also rose sharply.
During Friday afternoon trading, the main German and French market were up 3.5%, while in London the FTSE 100 rose 1.8%.
US markets also rose significantly on opening. The Dow Jones industrial average was up 1.5% in early trading.
The BBC's Andrew Walker, in Brussels, says the new loans will not be given "seniority" over private sector loans.
This means that if Spain were to default, those official lenders would not get preferential treatment. The move should make Spanish government debt a little more attractive to private investors, our correspondent says.
Late on Thursday, Spain and Italy withheld support for a growth package worth 120bn euros, demanding immediate EU measures to lower their borrowing costs.
The growth package, including a funding boost for the European Investment Bank, was later agreed.
The leaders also approved a roadmap for building a more integrated eurozone - what should eventually become a fiscal union. It includes controversial plans for "eurobonds" - mutualisation of eurozone debt.
Mrs Merkel has resisted the idea of pooling eurozone debt. On Friday she said "details about liability will have to be discussed by the finance ministers and those negotiations will be anything but easy".
The deal came about after new French President Francois Hollande appeared to throw his weight behind Italy and Spain.
Do you live in the eurozone? What do you think of the growth package? Let us know where you live and how the current economic situation is affecting your life:
If you are happy to be contacted by a BBC journalist please leave a telephone number that we can contact you on. In some cases a selection of your comments will be published, displaying your name as you provide it and location, unless you state otherwise. Your contact details will never be published. When sending us pictures, video or eyewitness accounts at no time should you endanger yourself or others, take any unnecessary risks or infringe any laws. Please ensure you have read the terms and conditions.
Terms and conditions
At 15:57:53 in EnglandA new commissioner will be appointed to oversee schools in Birmingham.
At 15:55:01 in SportJos Buttler has replaced wicketkeeper Matt Prior in the England squad for the third Test against India.
At 15:53:45 in SportMansfield Town have signed midfielder Simon Heslop on a free transfer.
At 15:52:43 in ScotlandCampaigner Peter Tatchell has called on First Minister Alex Salmond to condemn homophobia in some Commonwealth countries ahead of the Glasgow Games.
At 15:52:43 in HeadlinesFive children and an adult have been killed in a minibus crash near the French city of Troyes, south-east of Paris.
At 15:47:53 in EnglandAn autograph book signed by more than 100 World War One servicemen while they were patients in Cambridge has been donated to a hospital archive.
At 15:41:16 in EnglandA school that barred a girl from a trip to reward good attendance after she took a day off for her mother's funeral has blamed a computer for the blunder.
At 15:36:35 in SportEngland pace bowler James Anderson will face a hearing on 1 August after his alleged clash with India all-rounder Ravindra Jadeja during the first Test.
At 15:35:02 in EnglandA museum in Somerset is appealing for help in finding information about a World War One soldier, who is the subject of a 92-year-old bronze statue.
At 15:33:26 in EnglandNewcastle United paid tribute to the two fans who died in last week's plane crash in Ukraine, in their first match since the disaster.
Harvard CitationBBC News, 2012. Merkel defends compromise deal on eurozone banks [Online] (Updated 29th Jun 2012)
Available at: http://www.ukwirednews.com/news/1437723/Merkel-defends-compromise-deal-on-eurozone-banks [Accessed 22nd Jul 2014]
News In Other Categories
Hundreds of young footballers from all over the UK and Ireland are in Londonderry this week for the Foyle Cup.
A leading YouTube entrepreneur is facing legal action for alleged copyright infringement in her videos.
A giant Welsh cake baked in a Gwynedd town has been confirmed as the largest ever made.
Germany and Russia have a more complicated relationship than perhaps any other pair of countries. It is full of contradictions and tugs in different directions.
Hospitals in Wales have the lowest number of beds in Europe for patients with acute life-threatening illnesses.
Five children and an adult have been killed in a minibus crash near the French city of Troyes, south-east of Paris.