EU agrees on growth compact, eurozone heads for banking union

EU agrees on growth compact, eurozone heads for banking union
# 29 June 2012 20:45 (UTC +04:00)
Baku-APA. The European Union’s (EU) top leaders have agreed on a growth compact for long-term economic revival, while the crisis-hit eurozone has been one step closer to the banking union as a two-day summit ended here on Friday,APA reports quoting Xinhua.

EU leaders decided on the growth compact with 120 billion euros (about 150 billion U.S. dollars) to be mobilized in a bid to stimulate growth, investment and employment as well as make Europe more competitive, according to the conclusions of the June 28-29 summit.

Under the compact, country-specific recommendations have been endorsed to guide policies and budgets of some EU member states. In addition, a common patent system was also agreed upon among EU leaders to pave the way for more efficient implementation of intellectual property rights.

Meanwhile, eurozone leaders, after all-night negotiations in a 17-member summit, agreed to create a single supervisory body for its banks by the end of this year, which is seen as a first step towards a European banking union.

They also agreed that the bloc’s rescue fund would be lent directly to capitalize banks without increasing a country’s debt level, which should bring down the mounting borrowing costs especially for Italy and Spain and those countries will no longer be forced to adopt extra austerity measures.

"Many were skeptical about the summit. I hope they have been pleasantly surprised... We have taken decisions that were unthinkable just months ago," European Commission President Jose Manuel Barroso said at Friday’s press conference, adding that "very good progress" had been made at the summit.

Markets responded well to the summit’s result, with both the euro and European shares immediately surging. Yields of Spanish and Italian 10-year government bond also dropped significantly on Friday.

Barroso’s confidence was echoed by other leaders, as French President Francois Hollande said at his national press briefing, "We made significant progress even though everything has not been gathered yet."

EU leaders have had a score of summits for the past two and a half years since the crisis broke out, but still fail to contain it from spreading to more economies in the single-currency area.

Major divisions have existed between the bloc’s two largest economies ever since Hollande took office in France six weeks ago. The result of the eurozone summit was commented by some media as a defeat for German Chancellor Angela Merkel in terms of the gains for Italy and Spain.

In response, European Council President Herman Van Rompuy stressed that there was no winner or loser in the negotiations, and that EU leaders "were not entering that game."

"We have common task and common mission to stabilize the eurozone. We need to support those countries under market pressure, but they also have to deliver," Van Rompuy said at Friday’s press conference.

At the summit, EU leaders also touched on foreign affairs including violence in Syria and nuclear program in Iran, and agreed to open membership talks with Montenegro.
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