European stock markets have risen sharply at the start of trading after eurozone leaders agreed to take emergency action to bring down the borrowing costs of Italy and Spain, and to create a single supervisory body for eurozone banks.
London's FTSE 100 index rallied by 1.74 percent while Frankfurt's DAX 30 jumped 2.39 percent and the CAC 40 in Paris rose 2.86 percent. The index in Madrid rose by more than 4 percent at the start of trading on June 29, while Milan's share price index was up by 3 percent.
The rallies were propelled by higher share prices for banks after an EU summit reached agreement overnight on easing the eurozone debt crisis.
The agreement comes after Spain and Italy withdrew their objections to the $150 billion growth pact, enabling it to be passed.
Under the agreement, leaders from the 17-nation euro currency area agreed to use EU bailout funds to channel money directly to struggling banks.
They said direct recapitalization of banks will now be possible "under very strict conditions."
European Council President Herman Van Rompuy hailed the agreement as a "breakthrough."
"We agreed on something new, which is a breakthrough that the banks can be recapitalized directly in certain circumstances and the biggest of the most important condition is that we have to put in place a single supervisory mechanism," Van Rompuy said.
Bailout Conditions Eased
Eurozone leaders also agreed that EU countries -- sticking to budget rules -- could apply for bailout packages without other rigid conditions attached. That clears the way for emergency aid for Rome and Madrid.
Von Rompuy said it also meant there will not be any more countries struggling under tough conditions that have been imposed previously on EU countries that have received bailouts, such as Greece.
Earlier, the opposition of Spain and Italy had raised fears of failure at the two-day summit, which was aimed at paving the way for deeper economic integration and ending Europe's long-running financial crisis.
But in the end, the EU leaders agreed on what they called "the four building blocks" of a tighter European Union, with details due in a report to be issued in October.
Van Rompuy said the October report would be "a specific and time-bound road map" for achieving genuine economic and monetary union -- making the euro "an irreversible project."
The building blocks were laid out in a sweeping document that was presented by Van Rompuy and colleagues earlier this week that includes sharing debt in the form of jointly issued "eurobonds."
European Commission President Jose Manuel Barroso said the proposed pact shows a strong commitment of eurozone countries to stand behind the single currency.
"I think it is, in fact, a very ambitious decision that shows once again, the commitment of the member states namely those in the [eurozone] to the irreversibility of the euro and I think this will be recognized by all," Barroso said.
German Chancellor Angela Merkel said after the talks broke up shortly before dawn on June 29 that she was "very satisfied that we took good decisions on growth."
But it was not immediately clear whether the general agreement on the tighter union included a firm commitment from Germany on joint Eurobonds. Germany has, in the past, firmly opposed sharing debt with more troubled economies like Greece.
With reporting by Reuters, AP, and AFP