Eurozone leaders meet to consider closer fiscal union

There are fears that borrowing costs could rise after the credit ratings agency Moody’s downgraded 15 mostly European and American banks.

On Friday European leaders will try to pave the way for closer fiscal and banking union ahead of an EU summit.

In Luxembourg eurozone finance ministers decided on a mechanism for Spanish banks to get a multi-billion euro loan.

“In this context we would expect the Spanish authorities to put forward the formal request for financial assistance by next Monday. Following that request we’ll give a mandate to the Commission in liaison with the ECB (European Central Bank) and the EBA (European Banking Authority) to negotiate the memorandum of understanding related to the financial assistance,” said the Eurogroup President, Jean-Claude Juncker.

The leaders of France, Germany, Italy and Spain will meet in Rome.

They are aiming to tackle long-term plans to strengthen the euro’s foundations. Mario Monti has suggested using eurozone rescue funds to buy Spanish and Italian bonds to reduce their borrowing costs.

Angela Merkel has played down the proposal which investors say might be counter-productive.

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