Euro zone leaders agreed on Friday to bend their aid rules to shore up banks and bring down the borrowing costs of stricken members like Italy and Spain, in a sign the bloc is adopting a more flexible approach to solving its two-year old debt crisis.
The measures, agreed after 14 hours of intense talks that pitted Rome and Madrid against Europe's paymaster Berlin, were welcomed by financial markets. The euro rose sharply against the dollar and yields on Spanish and Italian debt fell sharply.
Ireland hailed the decisions, which represented a significant shift on Germany's part, as a "game changer" but many of the details remain to be worked out and leaders appeared at odds over just how strict the conditions attached to any assistance should be.
"The summit result offers no 'silver bullet' to solve the euro crisis once and for all," said Holger Schmieding of Berenberg Bank. "It is another attempt to buy some extra time for the underlying fiscal repair and structural reforms to show results. All in all, there is some progress."
Responding to pleas from Spanish and Italian leaders, who had threatened to block a package of growth measures, the euro zone agreed that its rescue funds could be used to stabilize bond markets without forcing countries that comply with EU budget rules to adopt extra austerity measures or economic reforms.
Read more: http://www.reuters.com/article/2012/06/29/us-eurozone-idUSBRE85O0CS20120629
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