Out of the frying pan

Angela Merkel lauded the EU's new 120-billion-euro ($149-billion) growth pact after at the close of a two-day summit in Brussels. Politicians made the key breakthroughs in the early hours of Friday morning after some 13 hours of talks, with the progress being largely touted as a win for Spain and Italy.

The two countries had withheld their approval for the growth pact to back up demands for action designed to reduce their borrowing costs. The main decision made here was to allow the eurozone's overarching rescue fund to provide money directly to banks in Italy and Spain, rather than burdening the governments in Rome and Madrid with the debt.

"The process was tough. The outcome was good," Italian Prime Minister Mario Monti said after the talks.

The 27 EU leaders also agreed that banks within the eurozone would be regulated by a single entity, the European Central Bank in Frankfurt, in a bid to make sure they were operating to similar standards across the bloc.

The decision will allow the eurozone's next-generation rainy-day-fund, the ESM, to lend money directly to at-risk lenders instead of providing the money through national governments. In the event that the ESM takes a long time to bring into force, its predecessor the EFSF might be granted the same ability.

"We stayed true to our philosophy that there has to be a give and take," Chancellor Merkel said on Friday, a message that might well have been aimed at her more skeptical colleagues in Berlin.

Both houses voting

Passing the growth pact was imperative for Merkel because it was one of the opposition's pre-conditions for it to approve the ESM and also the EU's new fiscal pact - a deal whereby EU countries agree to keep their annual deficits within pre-existing limits, or face sanctions.

Both these projects require parliamentary ratification, and need a two-thirds majority under German law - meaning that the ruling coalition would not have been able to push them through alone.

The lower house of the parliament, the Bundestag, and the upper house, the Bundesrat, are both voting on the measures on Friday.

The opposition Social Democrats (SPD) called an emergency meeting of the budgetary committee on Friday in response to the new deals in Brussels.

"What's now an open question for us is whether we can ratify the ESM as it now is, or whether that is not the case," SPD budgetary spokesman Carsten Schneider said.

As Finance Minister Wolfgang Schäuble sought to reassure the budget committee, Merkel announced that she would offer parliament a "clarification" on the overnight compromises before Friday's key votes.

msh/mz (AP, dpa, Reuters)