PARIS (AP) — European leaders confounded expectations and agreed to several steps, short-term and long, to try to stem the continent's spiraling debt crisis. Here are the key moves they are pledging:
— They plan to establish a single supervisor for banks, either the European Central Bank or an agency under its control.
— Once that is done, the eurozone's two bailout funds, known by their acronyms EFSF/ESM, will be able to recapitalize banks directly, rather than first handing over the money to the government of the country where they are based. The move is intended to stop banks from piling debt onto already stressed governments.
— They agreed that countries that are working to control their budgets could tap the rescue funds without having to go through the tough austerity measures that Greece, Ireland and Portugal were forced to accept in return for their bailout cash. This could make it more politically acceptable to national governments — such as Italy — to seek outside help.
— Bonds purchased by the bailout funds for Spain's bailout will no longer enjoy preferential treatment to other bondholders in case of a default. Previously, they enjoyed "senior" status, which had the unintended consequence of scaring private investors away.
— They agreed to continue negotiations on a raft of long-term reforms to the euro. These include a "banking union" that means deposit insurance and supervision of big banks would be handled at the European level, rather than at the national.
They are also seeking greater fiscal union that means Brussels would have greater say over national budgets. This idea remains extremely divisive, as no country is eager to relinquish sovereignty. Yet as a precondition for membership in the eurozone, all countries have already agreed to limit budget deficits to 3 percent of their gross domestic product and total debt levels of no more than 60 percent of GDP.