Originally posted by the Voice of America.
Voice of America content is produced by the Voice of America,
a United States federal government-sponsored entity, and is in
the public domain.


                      EU Leaders Agree on Bank Rescue Fund

   by VOA News

   Leaders of the European Union have reached an agreement to use its
   permanent rescue fund to directly boost struggling banks across the
   continent, and to seek a tighter long-term budgetary and political
   union.
   The decision was reached early Friday morning after hours of
   discussions at the EU summit in Brussels.  The agreement also
   establishes a joint banking supervisory body for the 17-nation bloc
   that uses the euro currency, and allows the rescue fund to buy the
   bonds of distressed sovereign borrowers. The last part was reached to
   satisfy the demands of Spain and Italy, who wanted help to ease their
   rising borrowing costs.
   European Council President Herman van Rompuy hailed the agreement
   during a press briefing after the meeting.
   "We agreed on something new which is a breakthrough that the banks can
   be recapitalized directly in certain circumstances and the biggest of
   the most important condition is that we have to put in place a single
   supervisory mechanism and second decision is that we are opening the
   possibilities to countries who are well behaving, that we are opening
   the possibilities to make use of financial stability instruments ESFS,
   ESM in order to reassure markets," said van Rompuy.
   The EU leaders also agreed to set aside about $150 billion to stimulate
   growth in the bloc's weakest economies.  The so-called "growth pact"
   was initially rejected by Spain and Italy, who held out until they won
   agreement on their demands.
   "The key element is that we boost the financing of the economy by
   mobilizing around 120 billion euros  (close to $150 billion ) for
   immediate growth matters," added van Rompuy. "A 10-billion-euro
   increase of the capital of European investment banks will increase the
   banks' overall lending capacity by 60 billion and this money must flow
   across Europe, not least to the most vulnerable countries and help
   companies grow themselves out of the crisis.''
   Both Rome and Madrid, with the eurozone's third and fourth largest
   economies, have watched in recent days as the interest rates on their
   loans have soared to near the 7 percent level.  That is the mark at
   which much smaller economies Greece, Ireland and Portugal were forced
   to secure international bailouts in the last two years.
   If Italy and Spain used the eurozone's bailout fund for their debt
   sales, it could cut their borrowing costs because they no longer would
   be subject to the whims of speculators on world markets.
   Spanish Prime Minister Mariano Rajoy warned this week that his
   government will not be able to sustain its high borrowing costs for
   much longer.  He won support from French President Francois Hollande,
   who said as he arrived at the summit that he was looking for "very
   quick solutions" to support Italy and Spain.
   Efforts to ease the plight of Italy and Spain overtook the initial
   summit focus on Germany, which has the currency bloc's most robust
   economy.
   Some European leaders are advocating the sale of eurobonds, debt
   supported by the entire 17-nation eurozone, not just individual
   governments.  But Berlin has opposed their adoption, fearing that its
   borrowing costs could jump even as those for weaker governments drop.
   German Chancellor Angela Merkel this week called eurobonds
   "economically wrong and counterproductive."  But finance minister
   Wolfgang Schaeuble signaled Germany may be shifting in its adamant
   opposition.
   He told a U.S. business publication, The Wall Street Journal, that
   Germany could agree to some form of shared eurozone debt if it is
   convinced that the move toward central European control over the
   spending practices of the eurozone's individual governments is
   "irreversible and well-coordinated."  He said there would be no common
   bonds "without a common fiscal policy."
   The new $150 billion package to boost the eurozone's stagnant economy
   amounts to about 1 percent of the eurozone economy, but the effect of
   the spending is uncertain because most of the money had already been
   earmarked for development projects.
     __________________________________________________________________

   [1]http://www.voanews.com/content/eu-leaders-agree-on-bank-rescue-fund/
   1349202.html

References

   1. http://www.voanews.com/content/eu-leaders-agree-on-bank-rescue-fund/1349202.html