New EU bailout plan a victory for Italy
Italian Prime Minister Mario Monti speaks during a press conference after a second day of the European Union leaders summit in Brussels on June 29, 2012.
Jeff Horwich: European leaders have settled on a new way to bail out banks. The structure will allow the EU to prop up troubled banks directly. That's instead of passing the funds through national governments. There's also going to be a new agency to supervise banks across the continent. All in all, It's the kind of change Spain, Italy and other struggling eurozone countries were looking for.
And joining me from Italy is the BBC's correspondent in Rome, Alan Johnston. Hello, Alan.
Alan Johnston: Hello, hi Jeff, hi.
Horwich: This outcome is considered something of a victory for Italy. What critically does Italy feel that it gets out of it?
Johnston: Well you know, Italians actually won a huge football/soccer victory last night over Germany in the big championships here in Europe, and Italians also feel that they won an important victory over Germany at the negotiating table in Brussels. Prime Minister Mario Monti of Italy went to those talks saying that countries like his ought to be able to access funds from a European rescue fund, a bailout fund, that money ought to be used to enter the bond markets and help drive down the crucifying interest rates that Italy is currently enduring.
Horwich: And what exactly is the significance, to be specific here, of this move by the EU to bypass governments and support struggling banks directly?
Johnston: Absolutely, you're right there -- bypassing governments. It used to be that the rules dictated that any bailout of banks has to go through a national government. But the problem with that was that you loaded up the governments with more debt, and now you're going to see the European bailout fund going directly to banks. That means in the future, if a bank crashes, it won't be the government that's expected to try to help it out -- it'll be this eurozone wide body that will have to try to pick up the pieces. And we don't know of course quite how big the holes in some of the European banks may be.
Horwich: Alan Johnston with the BBC in Rome. Thank you so much.
Johnston: Thanks very much.