Europe Debt, Europe Debt Crisis | featured news

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.

Italy and Spain, battling searing market pressure in the euro zone's widening debt crisis, blocked agreement on measures to promote growth at a European Union summit on Thursday to demand urgent action to bring down their borrowing costs.

Cyprus, the fifth euro zone country to seek emergency funding from Europe, may need a bailout of up to 10 billion euros — over half the size of its economy — officials said.

Yannis Stournaras, a well-respected liberal economist, was appointed Greece's new finance minister on Tuesday after the sudden resignation of the first choice for the job at a crucial moment for the debt-laden country.

Greece's new government should stop asking for more help and instead move quickly to enact reform measures agreed to in return for previous bailouts from its European partners, German Finance Minister Wolfgang Schaeuble said on Sunday.

The euro will survive even if Spain were cut off from capital markets, European Central Bank policymaker Ewald Nowotny said, adding the currency was in solid shape despite financial problems in some member countries.

Spain's government said Friday it plans to make its official request for EU aid for its banking sector Monday, as discussions continue on ways to inject European aid funds directly into ailing Spanish banks.

Greece's new government promised on Thursday to renegotiate the terms of the country's bailout without endangering its future in the euro, responding to intense pressure to ease mounting social tensions but also risking a showdown with European powers.

Spain's banks would need 51-62 billion euros ($64-78 billion) in extra capital to weather a serious downturn in the economy, less than a 100-billion-euro aid package offered by the euro zone, independent audits showed on Thursday.

Greece's new government is to ask lenders for two more years to hit fiscal targets, responding to huge public pressure for a softening of an international bailout but setting up a showdown with its euro zone partners.