Merkel defends compromise deal on eurozone banks

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Merkel defends compromise deal on eurozone banks

Postby Alfonso » Sat 30 Jun, 2012 20:35

Germany's Chancellor Angela Merkel says she is satisfied with a deal to help finance debt-laden eurozone countries.

"I think we found a good compromise," she said after all-night talks which saw her come under heavy pressure from Italy and Spain.

A new supervisory body will enable the European Central Bank (ECB) to "keep a very close eye on the banks", she said.

Spain is awaiting a 100bn-euro (£80bn; $125bn) recapitalisation of its troubled banks by the eurozone.

Mrs Merkel said the deal on lending would provide sufficient safeguards for the taxpayers' money used by the EU bailout funds.

The German Bundestag, the lower house of parliament, later approved the deal by a huge margin, with 491 votes for and 111 against. The upper house is expected to follow suit.

The EU's existing bailout fund - the European Financial Stability Facility - will provide aid under the current rules until the new permanent fund, the European Stability Mechanism (ESM), is ready to take over. The ESM is due to be launched next month.

The funds will not only be able to lend directly to banks. They will also be used to buy bonds of countries like Italy and Spain whose borrowing costs have soared - with the intention that those countries will not have to apply for a formal Greek-style bailout.

Eurozone leaders agreed to begin implementing the decisions by 9 July. However, it could take until the end of the year before the new money becomes available.

Germany, the biggest economic power in the eurozone, is reluctant to continue bailing out debt-laden countries. Its position is supported by the Netherlands, Austria and Finland.

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