EU leaders reach deal on debt crisis

European leaders reached agreement in the early hours of this morning on how to tackle the debt crisis afflicting the nations using the single currency, with significant concessions from Germany.

Wiki Commons/Lars Aronsson

Philip Aldrick
Telegraph

"The fundamental path was hacked open," German Chancellor Angela Merkel said.

Along the way, Mrs Merkel made some serious concessions, which might cost her when she faces her electorate at home.

Together with her eurozone counterparts, Chancellor Merkel agreed to boost the region's bailout fund, the European Financial Stability Facility (EFSF), so it can lend the full €440bn (£380bn) that it initially promised.

Up to now, the EFSF was only able to lend about €250bn because of several buffers required to get a good credit rating - fanning fears that it would not be big enough to save a large country like Spain.

The fund will also be allowed to buy the bonds of governments in financial difficulties on the open market, but only if the respective country is locked into a national bailout program based on strict conditions.

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