After 13 hours of tension and debate, Eurozone leaders have reached an agreement in the two-day summit in Brussels on early Friday.
Germany's Angela Merkel yielded to the demands of Italy and Spain for immediate Eurozone aid in bringing down the two countries' soaring borrowing costs. European leaders agreed on creating a bailout package for Eurozone's teetering banks.
Under the new agreement, the European Financial Stability Facility (EFSF) will provide assistance guided by the current rules. EFSF is a provisional program and a precursor to the European Stability Mechanism (ESM), a new institution set to be founded in Luxembourg and expected to begin operating this July.
Ratings agency Fitch sees the two-day summit as having exceeded expectations, saying "[it] marks a positive step that eases near-term pressure on Eurozone sovereign ratings. Eurozone leaders' decision to create a 'single supervisory mechanism' for banks is an important step towards ensuring the long-run viability of the euro. Once such a mechanism has been created, the soon to be established ESM could recapitalize banks directly. In Fitch's opinion, the creation of a single pan-Eurozone bank supervisor with the power to intervene and, if necessary, directly capitalize banks could greatly improve the functioning of Economic and Monetary Union (EMU)." Furthermore, Fitch warned that the risks in implementing the agreement successfully will be high, and the resolution of the current Eurozone debt crisis will take a long time.
Leaders have expressed relief and celebration over the agreement. European Council President Herman Van Rompuy called the agreement a "breakthrough," while Italian Prime Minister Mario Monti touted the agreement as a "double satisfaction for Italy," following the defeat of Germany in the semi-finals of the 2012 UEFA European Football Championship.
Asian and European stock markets soared after the deal was reached. Euro climbed more than one percent against the dollar, while the Australian dollar hit a one-week high. US stocks soared in early trading.