First football, now the euro: Italy claims win over Germany

view gallery VIEW GALLERY

Merkel faces backlash at home after finally agreeing to offer short-term aid to continent's struggling banks

Brussels

A breakthrough deal to rescue the euro was marred yesterday by bitter recriminations between Italy and Germany over who emerged the winner at a crunch summit of EU leaders in Brussels.

Angela Merkel, the German Chancellor, gave more ground than expected after Italy and Spain held a marathon summit to ransom. Backed by France's new Socialist President François Hollande, they refused to sign a €120bn "growth pact" until Germany backed short-term measures to aid the banks. Spain, desperate to reduce its crippling borrowing costs, will be the first beneficiary. Ireland and Italy could also be helped.

Following 13 hours of what insiders described as "horrid" negotiations, a deal was finally agreed in the early hours yesterday. After a single banking supervisor is set up, eurozone bailout funds will be able to recapitalise ailing banks directly, rather than handing the money to member states. The aim is to break the "vicious circle" of piling even more debt on to governments.

Mario Monti, the Italian Prime Minister, claimed a double victory over Germany hours after his country's football team had beaten the Germans in their Euro 2012 semi-final. While insisting his relations with Ms Merkel remained "excellent," Mr Monti said: "Italy worked a lot and put a lot of pressure at the negotiating table for this result to be achieved. This is a contribution of ideas that Italy put on the table which in the end of supported by everybody."

The Germans were said to be "irritated" at Italy's "spin". One diplomat said: "This is Monti fighting for his own survival. Angela Merkel has not capitulated. She can still turn off the cash tap. She has not given up the right to impose strict conditions on countries using the bailout funds."

Ms Merkel insisted the deal did not violate her principle of no aid without conditionality or the guidelines set by the German Parliament. "There was pressure here to find a solution and I saw my role as ensuring that these solutions should respect the procedures that we already know and have," she said. But the German Chancellor faced strong domestic criticism for her apparent climbdown as Opposition MPs demanded an immediate explanation."The Government has to account for its 180-degree turn," insisted Carsten Schneider, the Social Democrats' budgetary expert. "The summit was a crashing defeat for Angela Merkel."

Klaus-Peter Willisch, an MP from Ms Merkel's conservative Christian Democratic Party, warned that the concessions which were agreed meant "Germany being liable for everyone."

Despite the concessions, the German Parliament was expected last night to approve the eurozone's permanent bailout fund, the European Stability Mechanism. But Ms Merkel also has to get the measure approved by Germany's powerful Constitutional Court.

Financial markets reacted positively to the Brussels agreement yesterday but some analysts described it as more "sticking plaster".

Italian and Spanish borrowing costs fell as investors seemed to take comfort from the bond buying deal. Spanish 10 year yields fell to 6.35 and Italian 10 year yields eased to 5.85 per cent. Irish 10 year bond yields also fell. Spain's Ibex stock market jumped by 5.6 per cent and Italy's main equities market finished up 6.6 per cent.

But City analysts warned that the bond buying plan, once in operation, might merely encourage investors to sell their holdings of sovereign debt because there will only be €500bn of resources in the two bailout pots.

The decision in Brussels that the financial assistance from the bailout funds used to recapitalise Spain's banks will not gain senior status was welcome news to the lenders' bond holders, who feared being pushed down the queue of creditors.

David Cameron secured an important victory by ensuring that the banking supervisor will cover the eurozone rather than all 27 EU states. It will be based on the European Central Bank and so will not have the power to overrule the Bank of England.

The Prime Minister, who hammered out a deal with the European Commission, claimed he had also won a safeguard that the banking union would not undermine the EU's single market, saying it will apply only to the 17 eurozone nations. B

But EU sources said the "17 or 27 question" was still "up for grabs" and a series of legal wrangles could lie ahead. Mr Cameron admitted Britain would need "permanent vigilance" to defend its interests.

Summits past: Power plays

7 May 2010 Eurozone countries agreed a 110 billion euro bailout to prevent the collapse of the Greek economy. Talks continued into the early hours in Brussels before a bailout agreement was reached "conditional on the implementation of austerity measures".

27 October 2011 More "marathon" Brussels discussions over a 1 trillion e uro bailout for the most at risk Eurozone countries. European Union leaders reach a three-pronged agreement described as "vital" to solve the regions debt crisis. Larger European economies supposedly protected from the debt crisis by the deal.

9 December 2011 Prime Minister David Cameron vetoes EU-wide strategy to tackle the Eurozone crisis following more than 10 hours of late-night negotiations. A new accord strengthens ties between remaining EU states to tackle the financial crisis.

29th June 2012 After 13 hours of talks it was announced that EU leaders had agreed on a measure to use the Eurozone's planned bailout fund to support struggling banks. President of the EU council, Herman Van Rompuy, claims it will break the 'vicious circle' between banks and national governments.

Suggested Topics
Arts & Entertainment
Madonna in her music video for 'Like A Virgin'
music... and other misheard song lyrics
Extras
indybestFake it with 10 best self-tanners
Sport
Peter Moores was criticised for failing to handle top players when he last led the England team
sportFive years after being sacked from the job, Peter Moores to be named a cricket coach
News
Much of the colleges’ land is off-limits to locals in Cambridge, with tight security
educationAnd has the Cambridge I knew turned its back on me?
VIDEO
Sport
Steven Gerrard had to be talked into adopting a deeper role by his manager, Brendan Rodgers
sportThe city’s fight for justice after Hillsborough is embodied in Steven Gerrard, who's poised to lead his club to a remarkable triumph
News
The energy drink MosKa was banned for containing a heavy dose of the popular erectile dysfunction Levitra
news
Environment
People are buying increasing numbers of plants such as lavender to aid the insects
environmentGardeners rally round the endangered bumblebee
News
Ida Beate Loken has been living at the foot of a mountain since May
newsNorwegian gives up home comforts for a cave
Extras
indybest10 best gardening gloves
Sport
Australia's Dylan Tombides competes for the ball with Adal Matar of Kuwait during the AFC U-22 Championship Group C match in January
sportDylan Tombides was diagnosed with testicular cancer in 2011
Arts & Entertainment
tvIt might all be getting a bit much, but this is still the some of the finest TV ever made, says Grace Dent
News
Posted at the end of March, this tweeted photo was a week off the end of their Broadway shows
people
News
peopleStar to remain in hospital for up to 27 days to get over allergic reaction
Arts & Entertainment
The Honesty Policy is a group of anonymous Muslims who believe that the community needs a space to express itself without shame or judgement
music
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Apprentice IT Technician

£150.00 per week: QA Apprenticeships: This company is a company that specializ...

1st Line Technical Service Desk Analyst IT Apprentice

£153.75 per week: QA Apprenticeships: This company is an innovative outsourcin...

1st Line Helpdesk Engineer Apprentice

£150.00 per week: QA Apprenticeships: This company has been providing on site ...

Sales Associate Apprentice

£150.00 per week: QA Apprenticeships: We've been supplying best of breed peopl...

Day In a Page

How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

A History of the First World War in 100 moments

A visit to the Front Line by the Prime Minister's wife
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Jury still out on Manchester City boss Manuel Pellegrini

Jury still out on Pellegrini

Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players
Ben Stokes: 'Punching lockers isn't way forward'

Ben Stokes: 'Punching lockers isn't way forward'

The all-rounder has been hailed as future star after Ashes debut but incident in Caribbean added to doubts about discipline. Jon Culley meets a man looking to control his emotions
Mark Johnston: First £1 million jackpot spurs him on

Mark Johnston: First £1 million jackpot spurs him on

The most prize money ever at an All-Weather race day is up for grabs at Lingfield on Friday, and the record-breaking trainer tells Jon Freeman how times have changed
Ricky Gervais: 'People are waiting for me to fail. If you think it's awful, then just don't watch it'

Ricky Gervais: 'People are waiting for me to fail'

As the second series of his divisive sitcom 'Derek' hits screens, the comedian tells James Rampton why he'll never bow to the critics who habitually circle his work
Mad Men series 7, TV review: The suits are still sharp, but Don Draper has lost his edge

Mad Men returns for a final fling

The suits are still sharp, but Don Draper has lost his edge
Google finds a lift into space will never get off the ground as there is no material strong enough for a cable from Earth into orbit

Google finds a lift into space will never get off the ground

Technology giant’s scientists say there is no material strong enough for a cable from Earth into orbit