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29 Jun 2012 14:38
EU leaders have hailed a eurozone breakthrough, with German Chancellor Angela Merkel stressing that she stuck to her guns. (AP)
Meanwhile, French President François Hollande has highlighted positive market reactions.
"I think that we realised something important but we remained faithful to our principles: no offers without something in exchange," Merkel said as she returned for the second and final day of summit talks after an 11th-hour deal was struck just before dawn.
Merkel said Germany had remained true to its position of "giving, taking in return, setting conditions and maintaining control." In other words, she had not agreed to new measures to relieve pressure on indebted partners without obtaining conditions and control as well.
Hollande too welcomed the deal to save the single currency and reshape the eurozone, pointing to upbeat response from the markets and saying: "the initial announcements have already had positive effects".
European stock markets posted strong gains, with Italy and Spain leaping by 2.36% and 2.46% respectively in midday trading.
The euro soared to $1.2563 from $1.2442 late in New York on Thursday, while the interest rate or yield on 10-year Spanish bonds fell back to 6.67% from 6.896% late on Thursday.
Italian 10-year bonds traded at 5.865%, down from 6.812%.
The late-night deal secured after tough and dramatic talks paved the way for the eurozone's €500-billion bailout fund to recapitalise ailing banks directly, a move aimed at saving governments from piling more debt.
EU leaders also agreed to stump up about €120-billion to boost growth in struggling countries, and agreed to set up a Europe-wide banking supervisory auhority by the end of the year.
Merkel underscored that the creation of such an authority will require "a unanimous decision by the [European] Council," suggesting that it was not yet a done deal.
Another unanimous decision would be required for the European Stability Mechanism (ESM) to inject money directly into troubled eurozone banks, the German chancellor said.
And precise conditions would be set "in each specific case, for each bank," she stressed.
A "troika" of inspectors from the International Monetary Fund, European Central Bank and European Commission would be tasked with oversight of money provided through the ESM and a temporary fund known as the EFSF, she said.
That position that could yet lead to friction with Italy in particular, which does not want to accept strict surveillance in exchange for aid because Rome says it has already implemented broad reforms of its finances and economy.
Danish Prime Minister Helle Thorning-Schmidt, whose country holds the rotating EU presidency said: "Last night's agreement is a very solid one.
"In a time when we have talked a lot about the crisis, we have now a little light in the dark."
EU internal market commissioner Michel Barnier told Radio France Internationale: "In the end it is Europe that wins, the European project is improving."
British Prime Minister David Cameron said of the deal between the 17 single currency nations: "I think they took some important steps forward last night and I very much applaud that." - Sapa-AFP
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