BRUSSELS, June 29 (Reuters) - Euro zone leaders agreed to bend their aid rules to shore up banks and bring down the borrowing costs of stricken members like Italy and Spain, in a sign the bloc is adopting a more flexible approach to solving its two-year old debt crisis.
Following are comments from EU leaders and officials after their two-day talks:
“Italy doesn’t plan to activate the mechanism for now, but I don’t exclude anything for the future.”
“There is a past history of many European decisions, when you thought they would have sufficed, but it hasn’t happened, and maybe the same thing will happen this time, but looking at the overall package I see more substance than on many other occasions.”
“Each detail of how it is with liability must now be negotiated. Those will be quite difficult negotiations, as we are in a new area. Therefore it won’t take just 10 days.”
ON MEASURES TO KEEP SPANISH AND ITALIAN DEBT COSTS FROM SPIRALLING OUT OF CONTROL:
“There was pressure here to find a solution and I saw my role as ensuring that these solutions should respect the procedures that we already know and have and the guidelines given by the Bundestag.”
“There was also discussion about whether one can remove the ESM’s preferred creditor status in general. That did not happen. There were some who wanted it removed in general, but quite a large number of countries said there was no way it should be removed in general.
“We only agreed that because Spain is applying under the EFSF it should keep the same conditions.”
ON WHETHER SHE WAS SURE THE GERMAN PARLIAMENT’S VOTE ON RATIFICATION OF THE ESM AND FISCAL PACT LATER ON FRIDAY:
“110 percent... The ESM as it will be used here will be voted on today.”
“This was not France and Germany arriving with a solution, like in the past. It was France and Germany, along with others, reaching a solution. That’s why it took so long and that’s why it went so far.”
“Nobody should say I won, or I lost. It’s Europe that was at stake and it’s Europe that won, and it’s the euro zone that has been strengthened and reinforced and that was the sole aim.”
“If Italy and Spain applied pressure during the night it was so that the whole euro zone would come out stronger.”
ON HOW HE WOULD SELL LOSS OF BUDGET SOVEREIGNTY TO THE FRENCH PEOPLE:
“The French budget has always been subject to rules, but we often got around them because there was no discipline. We must do more to respect the rules. We are not yet at the point of taking a federal leap, what we must do is to put into action what exists today.
“But when I see the reticence of other countries (on European integration) I say to myself that France is actually in advance.”
“This is what I wanted - for instruments to be fully, rapidly and efficiently deployed to respond to movements in the markets.”
ASKED IF SPAIN COULD ASK FOR THE BAILOUT FUNDS TO INTERVENE ON ITS BOND MARKET IN ORDER TO BRING DOWN BORROWING COSTS:
“No, the truth is that we’re not planning anything along those lines.”
ON POSSIBILITY OF RECAPITALISING BANKS DIRECTLY THROUGH THE EUROPEAN RESCUE FUNDS:
“I hope that in 2012 (it will be ready).”
“The most important, the most relevant... is that the deal in my opinion strengthens the position of the euro and that’s what important and the rest are minor issues.”
“This is a triumph of the euro. We had a rich conversation and all countries that are part of the euro project coincide on the fundamental and essential and we want this currency to go on, we want more integration, more budgetary integration, more monetary integration.”
“The European project is today stronger and more credible than yesterday.”
“Last night was significant, but I have been to enough of these summits to know that Rome, Europe, none of these things, was built in a day, there will be other steps required.
“But for the first time in some time we have actually seen steps taken that I think that the markets will see are trying to get ahead of the game.
“They need to be followed through and I hope there won’t be a lot of quibbling and worrying about is it too far and all the rest of it.”
“I don’t see this as some sort of face off between Italy and Germany or whoever. Taking the right steps is right for all of them.
“It is very difficult in their domestic politics. Angela Merkel is being asked to do some things that are very difficult for her to deliver.”
“We were not complete as a euro zone summit by the end of our meeting at noon. The German chancellor had to leave because she had a debate at the Bundestag so we couldn’t take a decision. We have to be with 17 (euro zone countries) to take decisions on appointments. But it is highly likely that we can take decisions at the beginning of the month of July.”
“It showed the long-term commitment to the euro by all member states of the euro area, and also it reached tangible results in the shorter term. The waiver of the preferred creditor status of the ESM (permanent bailout fund) for Spain is one of the results.
“The future possibility of using the ESM for direct recapitalisation of the banks which was something that the ECB had advocated for some time is also another good result.
“But we have to keep in mind that all these things should be, to be credible, should be accompanied by strict conditionality. This is essential, otherwise they will not be credible.
“Also, the Commission will present a proposal based on Article 127.6 of the Treaty for the creation of a single supervisory mechanism and within which the ECB will take up supervisory tasks for the banks of the euro zone.”
Following are comments by EU leaders before Friday’s talks:
ON CONDITIONALITY FOR BOND-BUYING BY BAILOUT FUNDS:
“We have taken important decisions last night. First we agreed that if countries need the instruments to buy bonds on the primary or secondary market from the EFSF or ESM then the conditionality will be agreed as follows:
“The country report will be presented to the Commission on which basis we will agree a memorandum of understanding in which there will be a time-frame. The EU/IMF ‘troika’ will then supervise, as it is always usual in the EFSF and ESM, whether the conditions are met.
“That would be the case if Spain or Italy, with regards to their interest burden, make use of such instruments. Then this conditionality would apply, which we have agreed on precisely, according to the rules we have.”
“We are completely sticking to our scheme: benefit, counter-benefit, conditionality and control. I think we have done something important but remained faithful to our philosophy: no benefit without counter-benefit.”
“Secondly, regarding the banking recapitalisation which Spain has requested, a request will be made with the EFSF. Once the ESM becomes available, then the application will be transferred to the ESM. The seniority of the bonds will not be changed. For Spain we won’t do what is otherwise applicable in the ESM regarding the preferred creditor status because the request was made through the EFSF, where such details do not apply.”
ON LONG- AND SHORT-TERM MEASURES:
“I’m satisfied, because I wished, like others, for a strengthening of the rescue mechanism. I think we will still need a provision for banks in the medium term so a stronger recapitalisation is possible.
“But just to have achieved what we have achieved shows that everybody wanted the euro zone to exist and to be stable and that’s a good sign.
“It’s good that we debated it together and didn’t start with the long term and finish with the short term; it took some time but it was worth it.
“If a country in need asks why we first talk about long-term measures and then the short-term ones, it is only fair to suggest that we take the two together. That’s how much respect there should be for every single member state.”
“I think the countries of the euro zone did take some important steps forward last night.
“For a long time we’ve been saying more action needs to be taken for short-term financial stability, more to recapitalise banks, to use firewalls, to drive down bond spreads and interest rates to create greater stability, and I think they took some important steps forward last night and I very much applaud that.
“There’s still important work to do, and that’s what we’ll be doing today.”
“There were three advances. The first is on the recapitalisation of the banks with banking supervision and with a calendar. The second is to allow easier solutions for Spain, which can be put into effect rapidly. And finally, there will be full use of the (bailout) instruments, the EFSF and the ESM, to give states that have made efforts the necessary protection in relation to interest rates.”
“It is very important that we put into motion procedures for immediate action - something that was much hoped for. Bank supervision for a recapitalisation of the banks will take a bit more time, but this will be a lasting move in the right direction.
“We defined a vision for the euro - for economic and monetary union - saying what we will do together, and there will be greater solidarity at each step in integration. The banking union was the first illustration of this.”
ON IMPACT OF EURO ZONE DEAL ON SHORT-TERM BOND SUPPORT:
“We are heading for a future where we will need very general supervisory bodies to look more carefully, more strictly, and (which are) more responsible for the financial sector and banking sector, and that’s where we are heading.
“I hope that in a very few weeks, the euro zone leaders will be able to find a concrete mechanism for how to control the not-very-well-behaving banks and to help them.”