EURO Summit - banks received an offer they could not refuse- "but do the political leaders have the backbone to control Financial Industry?" - by Nicholas Comfort, Gavin Finch and Liam Vaughan

European bank stocks jumped after leaders agreed to bolster lenders’ capital and boost the region’s rescue fund in a bid to stem the debt crisis. European leaders agreed to boost the firepower of the region’s rescue fund to 1 trillion euros ($1.4 trillion) and persuaded bondholders to accept a 50 percent loss on their holdings of Greek government debt. Banks will, as part of the plan, need to raise capital to insulate themselves against losses on government debt. Still to be decided are the details of the haircut, what assets banks can count as capital, how banks will raise it, and whether future bank debt is backed by a national or European guarantee.

The world’s biggest banks bowed to what German Chancellor Angela Merkel called the “last word,” agreeing to write down their Greek government debt by half in the pivotal piece of the euro area’s bid to stem the financial crisis. The Institute of International Finance, which represents 450 financial firms, agreed to “develop a concrete voluntary agreement” on a 50 percent haircut on Greek debt, Managing Director Charles Dallara said in a statement e-mailed at 4:26 a.m. in Brussels.

Euro-area leaders who called Dallara into a meeting at about midnight, forcing a break in their 10-hour summit, said that while the bond transaction will be voluntary, the decision resulted from an offer he couldn’t refuse. “It was the fiercely delivered wish by Merkel, Sarkozy, Juncker, that if a voluntary agreement with the banks was not possible, we wouldn’t resist one second to move toward a scenario of the total insolvency of Greece,” Luxembourg Prime Minister Jean-Claude Juncker told reporters. That “would have cost states a lot of money and would have ruined the banks.”

Note EU-Digest: European Political leaders must understand they will be held accountable if they let the World Banking and Financial Industry try and maneuver out of this agreement. Up front the Financial Industry must also be made very conscious of the fact that any possible future bank debt can in no way or form be propped up by taxpayers supported Government guarantees.

If once again the political leadership and the financial industry make a mess of things, the results will be catastrophic and the public reaction violent to the point where the Wall Street Occupation Movement will look like a "baby shower party" in comparison.

For more: Bank Stocks Jump as EU Deal Eases Debt Crisis Concern - Bloomberg