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Spain and Italy Hold Fast, Germany Bends in Eurozone Deal

Full details still shakey, but late-night talks end with Eurozone promising new path forward

by
Common Dreams staff

German chancellor Angela Merkel arrives for day two of the summit in Brussels on Friday. (Photograph: John Thys/AFP/Getty Images)

Eurozone leaders debated long into the night in Brussels, but daybreak on Friday saw a tentative agreement in which both Spain and Italy seemed content with their ability to break down Germany's resistance to 'softer bailout conditions' for their lagging economies and all countries have agreed in principle to strengthen the financial coordination of the 17-member economic bloc moving forward.

EU president Herman Van Rompuy called the deal a "real breakthrough".  The key development in the agreement was that the European bailout fund will be allowed to offer assistance directly to troubled banks without demanding that those loans be funneled through the bank's respective government. This will allow private banks to borrow without impacting the sovereign debt of their country or create burdens on already stressed state budgets.

In addition, the deal would allow for centralized bailout funds to be allocated more "flexibly" which would, in theory, also relax the cost of borrowing for national economies, who have been battered by skyrocketing prices in the private bond market.  And lastly, the deal paves the way for the creation of single supervisory body - housed inside the ECB - that would oversee all banks in the Eurozone.

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And lastly, the deal promises the creation and funding of a 'growth pact' which would fund employment efforts across the member nations' economies.

"The growth pact," according to reporting in The Guardian, "Has been pushed mainly by France and it is the troubled economies of the Eurozone, such as Italy and Spain, who are keenest to promote it in an attempt to turn the tide on the German emphasis on austerity and fiscal discipline."

Newly elected socialist President of France, Francois Hollande, praised the deal and said leaders had defined a "vision for the euro" with greater solidarity.

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