Credit markets breathed a sigh of relief today, after European Union leaders agreed to a plan allowing its bailout funds to directly recapitalize troubled banks. After a 14-hour debate at a summit in Brussels, leaders emerged with the outline of a plan to more swiftly create a single supervisory body to directly help banks. They also agreed not to prioritize this bailout debt ahead of any other creditors' bonds—something that had been scaring off buyers, the Wall Street Journal reports.
Moreover, leaders agreed that bailout funds would come without austerity strings attached, provided the countries comply with EU budget rules—which, according to Reuters, is a major concession from Germany. "The summit results offer no 'silver bullet' to solve the euro crisis once and for all," one banker cautioned. "It is another attempt to buy some extra time for the underlying fiscal repair." But investors were jubilant anyway, the Journal reports, with yields plummeting on Spanish and Italian bonds.