EU leaders have agreed to use the eurozone's bailout fund to support struggling banks directly, without adding to government debt, BBC News reported.

Speaking after 13 hours of talks in Brussels, EU chief Herman van Rompuy also said a eurozone-wide supervisory body for banks would be created.

Officials said the plans could be finalised during July.

Analysts have said Germany appears to have given ground after pressure from Spain and Italy to provide more support.

The two southern European countries had withheld support from an earlier plan for a growth package worth 120bn euros (£96bn; $149bn).

They wanted measures to lower their borrowing costs.

The euro surged against the dollar in Asian trade after the news from Brussels.

Announcing the deal, Rompuy said it would break the "vicious circle" between banks and national governments.

The deal came about after new French President Francois Hollande appeared to throw his weight behind Italy and Spain.
"I'm here to try to find rapid solutions for those countries facing pressure from the market, despite having made huge efforts to balance their budgets," the socialist French president said.