BRUSSELS — After 18 disappointing summits, Europe's leaders appeared Friday to have finally come up with a set of measures that show they are serious about solving their crippling debt crisis.
Meeting for the 19th time since the debt crisis exploded in late 2009, leaders of the 17 countries that use the euro currency agreed to let funds intended to bail out indebted governments funnel money directly to struggling banks as well. The move is intended to stop banks from piling debt onto already stressed governments.
The leaders also agreed to ease austerity requirements for countries that take bailouts — a victory for Spain and Italy, both of which they have done much already to clean up their economies, though they insist they don't want bailouts. The move is also a sign that Germany may be easing in its insistence on brutal austerity measures in exchange for loans.
Leaders of the full 27-member European Union, which includes non-euro countries such as Britain and Poland, also agreed to a long-term plan for a tighter budgetary and political union.
The scale of the moves were unexpected and provided investors a reason for optimism, even as analysts cast doubt on the plans' feasibility and noted that other fundamental problems with the common currency remain.
Stocks in Asia and Europe surged Friday, with markets in countries on the front line of the crisis doing particularly well. Italy's FTSE MIB and Spain's IBEX indexes each rose 3 percent.
Perhaps more importantly, the yield on Spain's 10-year bond dropped by 0.45 percentage points to 6.45 percent, reflecting eased concern following the pact. Italy's was down by 0.22 percentage points to 5.87 percent. Both countries have seen their rates edge toward the 7 percent level which is seen as unsustainable over the long term.
"I think the elements we put together will reassure the markets," Eurogroup President Jean-Claude Juncker said as he arrived for further talks Friday.
The importance of recapitalizing banks directly from the bailout fund became evident this month when Spain was offered €100 billion ($125.6 billion) for its shaky banks. Previously the bailout loan would have to be made to Spain, which would lend it to the banks. The prospect of having that debt on the government's books spooked investors, who began demanding higher interest rates for lending money to Spain.
Lending the money directly to the banks would avoid putting that debt on the government's books.
European Council President Herman Van Rompuy called it a "breakthrough."
Analysts remain skeptical about whether the moves will be enough to fix Europe's debt crisis, especially as the amount of money available to help in the crisis — some €500 billion — is dwarfed by the amount of debt across the continent. Italy alone has outstanding debt of €2.4 trillion.
"These steps are the obvious ones to take to try to restore some confidence in the market in the short term," said Gary Jenkins, managing director of Swordfish Research in London. "Alone, they do not solve the underlying problems but they might buy a bit of time, which is probably about the best they can do right now."
Italian Premier Mario Monti said the decision to ease the austerity conditions on countries that follow budget rules is a recognition of the hard work leaders like him have done in reforming their economies. Van Rompuy agreed.
"We are opening the possibilities for countries that are well-behaving to make use of financial stability instruments ... to reassure markets and get again some stability around some of the sovereign bonds of our member states," he said.
European Central Bank President Mario Draghi said he was "very pleased" with the result of the discussions.
As well as trying to fix the euro, the EU leaders also agreed to devote €120 billion in stimulus to encourage growth and create jobs, though half of it had already been earmarked and it includes only €10 billion in actual new commitments. France had pushed for the growth package, arguing that austerity measures are stifling growth and making things worse.
German Chancellor Angela Merkel said she was "very satisfied that we took good decisions on growth." She must defend the deal in front of a skeptical German parliament later Friday.
The 27 leaders of the EU agreed on "four building blocks" of a tighter union — but postponed until a study due in October decisions on the specifics. The building blocks, which include sharing debt in the form of jointly issued Eurobonds, were laid out in a sweeping document presented by Van Rompuy and colleagues before the summit.
Van Rompuy said the report would be "a specific and time-bound roadmap for the achievement of a genuine economic and monetary union."
"The aim is to make the euro an irreversible project," he said.
He did not say, however, whether the general agreement on the tighter union included any commitment on eurobonds from Germany and other stronger economies that have firmly opposed sharing debt with more profligate countries such as Greece.