The talks went right through the night but ended in eurozone leaders agreeing a series of new measures aimed at stabilising the single currency.
This morning they announced the creation of a sole supervisory body to oversee banks in the eurozone, to break what EU President Herman Van Rompuy described as the “vicious cycle” of interdependence of banks and sovereign governments by involving the European Central Bank.
Speaking to reporters after the marathon talks in Brussels Van Rompuy said: “We urge the rapid conclusion of the memorandum of understanding attached to the financial support to Spain for recapitalising its banking sector and we are reaffirming that the financial assistance will be provided by the EFSF until the ESM becomes available,” he said.
There was also agreement on emergency steps to bring down spiralling borrowing costs in Italy and Spain. Both Rome and Madrid had insisted on this before signing up to a deal on a growth pact.
It was decided the ESM – the European Stability Mechanism – will be able to lend directly to banks without increasing national deficits.