Italy and Spain put Merkel in the corner

It took them 13 hours, but eurozone leaders have finally agreed to use bailout funds to recapitalise banks directly. The deal, which was reached at 4am (David Cameron had gone to bed at 1am because this is a eurozone, not EU matter), involved Germany giving in to the demands of Italy and Spain. You can read the statement from the euro area leaders here, but essentially what it says is that the refinancing will not take place until a single banking supervisor is set up, to be run by the European Central Bank. This was originally going to be a long-term project, but leaders have now set a deadline of the end of this year for everything to be up and running.

Angela Merkel was essentially backed into a corner by Italy and Spain at the summit, refusing to agree to anything until the refinancing deal was pushed through.