Spanish economy set to stablise after debt deal

Spain offered some hope for the beleaguered eurozone as its Finance Minister, Luis de Guindos, said his country's economy should stabilise during the latter half of the year despite another fall in output in the second quarter.

Mr de Guindos was speaking yesterday after European leaders agreed that a eurozone rescue fund could inject cash directly into problematic banks, bypassing national governments, and intervene in debt markets – a move that helped financial markets to rally on Friday.

The deal has been widely seen as a victory for Spain and Italy because the German Chancellor, Angela Merkel, had previously opposed the idea of using common euro funds to support troubled economies.

"Everyone has come away from this important summit a winner," claimed Mr de Guindos. "From now on, we must all contribute."

However, some analysts warned that any funds are still subject to unspecified tough "economy-wide" conditions and that could cause problems for Spain and Italy.