hails agreement in EU
An agreement between leaders in the European Union regarding bank capitalisation has been positively received by foreign exchange group HiFX.
This week, member states agreed at a summit that money in Europe's bailout fund could be used to help banks directly. This means governments across the continent will not have to take on additional debt when support is required for financial institutions.
According to HiFX, EU members will therefore be able to avoid the "financial noose" that had been created by previous proposals to help beleaguered banks.
As a result, governments will have the ability to "raise capital via bond markets for spending needs" and "supporting their economies, rather than shoring up liquidity tight financial organisations".
Tim Kirkham, director of risk advisory services at the foreign exchange specialist, believes the agreement could help the continent become "more cohesive" and perhaps enable pressures on the euro to ease.
"These Euro meetings could grow in importance in the coming weeks as we watch for signs of a reduction in [Angela] Merkel's intransigence," he commented.
Indeed, some commentators have stated that the nature of this agreement suggests the German chancellor has bowed to pressure from Spain and Italy, despite managing to score some concessions of her own throughout the talks.
British prime minister David Cameron has also hailed the deal, arguing it represents an important step forward in tackling the continuing financial crisis in the eurozone.
He said the UK has argued for some time that more needs to be done to recapitalise the banks in order to achieve greater short-term financial stability.
HiFX has noted that the deal also appears to have been greeted positively on the financial markets, with the euro going up against the dollar and gaining against the pound.
The so-called European Stability Mechanism will be introduced in July.