European leaders reach 'breakthrough' deal

Published Jun 29, 2012 02:46pm

German Chancellor Angela Merkel speaks to media as she arrives for a second day of the European Union leaders summit in Brussels on June 29, 2012. — Photo AFP

BRUSSELS:  After 18 disappointing summits since the start of the debt crisis,Europe's leaders appeared Friday 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 despite their efforts to cut spending and reform their labor markets.

In Germany, Chancellor Angela Merkel is likely to face a grilling from a skeptical German Parliament later. 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 inBrussels.

Van Rompuy dismissed talk that Merkel had lost in the negotiations.

"It was a tough negotiation," Van Rompuy said. "It took hours yesterday. And you can't summarize this in winners and losers."


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Comments (2) (Closed)


shahid
Jun 29, 2012 06:10pm
countries of subcotinent should follow the example of Europe.
DDate
Jun 29, 2012 04:24pm
Up go the stock markets!!!