Eurozone leaders agreed at a summit dragging into Friday morning to change the terms of an upcoming Spanish bank rescue and allow countries like Italy to tap into eurozone funds to reduce its borrowing costs, European Union President Herman Van Rompuy said.
Spain will be allowed to channel eurozone loans directly to stricken lenders to avoid adding to its public debt load, but only after “an effective single supervision mechanism is established” for the European banking sector, he said.
Until then, existing rules will apply, meaning that the Spanish government will be the intermediary for the loans and remain liable for them.
Madrid also won acceptance for its request that its eurozone creditors should not enjoy preferential treatment over private investors, which it feared could have deterred private investment.
In reference to Italy, financial stability instruments to reduce borrowing costs should be made available “already this summer” for countries that are complying with EU policy prescriptions on deficits and economic reforms, top eurozone official Thomas Wieser added.