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EU leaders' meeting continues Friday after bank deal

EU leaders met for a second day of talks in Brussels on Friday  following a late night session in which they reached a deal to allow struggling European banks to access emergency funds directly without having to meet tough new conditions.

The deal will enable euro zone members to use the single currency’s bailout funds to bring down borrowing costs for struggling countries.

Italy and Spain had demanded emergency action for fear of being shut out of capital markets, and the summit was also to address long-term plans for closer fiscal and banking union.

Earlier Italian Prime Minister Mario Monti and his Spanish counterpart, Mariano Rajoy, had refused to sign off on a 120 billion euro (US$149 billion) growth package until EU paymaster Germany approved short-term measures to ease their cost of credit.

The clash highlighted tensions between northern creditor countries and heavily indebted southern states over the future shape of the troubled 17-nation currency bloc, now in the third year of a sovereign debt crisis.

German Chancellor Angela Merkel, leader of Europe’s biggest economy, said she was satisfied with the result although she had dismissed any need for emergency support for Italian and Spanish bonds earlier this week.

Other topics on the agenda for Friday’s talks include the crisis in Syria and Montenegro’s proposed accession to the EU.