02:32 - Source: CNN
Eurozone reaches a deal

Story highlights

NEW: Spain and Italy put pressure on eurozone leaders to come up with short-term measures

Under the deal, eurozone banks could be directly aided without adding to government debt

A single supervisory body will be set up to oversee the eurozone's banks

European markets responded positively to the news early Friday

CNN —  

European leaders reached a “breakthrough” deal early Friday to ease the recapitalization of struggling banks that should help draw the eurozone back from the brink of a gathering crisis.

Under the deal, European leaders agreed to create a single supervisory body to oversee the eurozone’s banks which could use the single currency area’s rescue funds, the European Financial Stability Facility or European Stability Mechanism, to aid banks directly without adding to governments’ debt.

European Union leaders are hoping for implementation of the agreement by July 9, an EU statement said.

The deal means Spain’s formal request this week for eurozone bailout funds to recapitalize its troubled banking sector will not add to its sovereign debt. Madrid had feared the increased debt load would send its borrowing costs even higher.

Ireland, which hopes to rework the terms of its bailout deal, and Italy, which like Spain is battling with spiraling government borrowing costs, could also benefit from the new deal.

European Council President Herman van Rompuy announced the agreement, seen as a concession by German Chancellor Angela Merkel, after a marathon late-night meeting in Brussels, Belgium.