EU summit agrees on banking union; €120-bn growth plan

The two-day summit of the leaders of the European Union in Brussels ended yesterday with a landmark agreement on unified banking which will facilitate direct recapitalisation of struggling banks from the EU's bailout funds and also a €120-billion growth plan to stimulate the recession-hit economies of the region.

In a statement following the conference, president of the European Commission (EC), the executive arm of the EU, Jose Manuel Barroso said, ''This European Council and the euro area summit have delivered what our citizens, international partners and investors have been asking for. It has delivered a robust set of answers which should significantly strengthen confidence in Europe's financial stability.''

The summit has agreed on a single banking supervisory mechanism for the euro area, which when established, will allow for direct recapitalisation of bank by EU's European Stability Mechanism (ESM).

The commission has proposed European Central Bank (ECB) to take the responsibility of a banking supervisor, which is the first major step towards creation of a European banking union.

"It is a first step to break the vicious circle between banks and sovereigns," European Council president Herman Van Rompuy told at a news conference after the talks.

ECB president Mario Draghi said, "I am actually quite pleased with the outcome of the European Council. It showed the long-term commitment to the euro by all member states of the euro area."