The EFSF/ESM rescue funds only have €500bn of available capital, yet the total liabilities on Spain's and Italy's balance sheets" top €2.4 trillion... This could curb the market's enthusiasm as we haven't heard any signs that these bailout funds will be topped up. 08.18 European markets have surged in early trade after the news from the EU summit just a few hours ago. Futures were pointing to climbs across the board, apart from in Germany and France - but in the event even they've decided to join the rally. The FTSE 100 has climbed 1.74pc, the DAX is up 2.39pc and the CAC has gained 2.86pc. Spain's IBEX is 4.05pc higher and Italy's FTSE MIB is up 3.07pc. 08.01 The fake Angela Merkel has a knack for summing up the situation with a single tweet, and doesn't disappoint this morning. 07.30 European Council chairman Herman Van Rompuy seems relieved that a deal has been done. There were some worrying moments during last night's stand-off between Spain and Italy and Germany. He said the aim was to create a supervisory mechanism for eurozone banks involving the European Central Bank to break the "vicious circle" of dependence between banks and sovereign governments. We are opening the possibility to countries that are well behaving to make use of financial stability instruments in order to reassure markets and to get again some stability around some of the sovereign bonds of our member states. The aim is of course to make the euro an irreversible project. 07.15 Just as well for France that EU leaders have agreed a €120bn growth pact, as the figures out today show first quarter growth stalled. National statistics agency INSEE says its final estimate of GDP was unchanged quarter-on-quarter, confirming an initial estimate published last month. The eurozone's second largest economy grew just 0.1pc in the fourth quarter. 07.05 Yields on 10-year Spanish and Italian bonds fell to 6.48pc and 5.87pc respectively in early trading, after eurozone leaders agreed a plan to allow rescue funds to be used to stabilise debt markets and directly recapitalise banks. One trader said: It's definitely risk on for now, but it looks like Germany have been rather backed into a corner and we'll have to see what comes out today. German 10-year bond yields rose 10 basis points to 1.61pc. 06.45 Mario Monti, the Italian Prime Minister, celebrated the agreement as a "very important deal for the future of the EU and the eurozone." Bruno Waterfield writes: Here is a summary of what they agreed: Spanish banks will be recapitalised directly by allowing a €100bn EU bailout to be transferred off Spain's balance sheet after the European Central Bank takes over as the single currency's banking supervisor at the end of the year. 06.40 Despite apparent market optimism, some scepticism remains. Jackson Wong, vice president at Tanrich Securities in Hong Kong. said: We don't expect a magical formula that can solve the problem right out from the EU summit. However, if we can see the stances from all the leaders, especially from Germany - that they are heading in the right direction - I think going forward, it should be OK. Euro rise in Asian trading on news of the eurozone agreement. Graph: Bloomberg 06.38 The euro spiked against the dollar after news of the deal, and Asian stock markets rose sharply. 06.35 So, Monti and Rajoy got their way, with German Chancellor Angela Merkel retreating. Bruno Waterfield in Brussels sums it up succinctly, but with a warning: Ambushed - she always gets her revenge in the end, as Sarko discovered. 06.34 It looks like those late night summits are back. Eurozone leaders agreed early this morning to take emergency action to bring down Italy's and Spain's spiralling borrowing costs and to create a single supervisory body for eurozone banks by the end of this year, a first step towards a European banking union. It followed a tense first day at the EU summit, with Italian prime minister Mario Monti and his Spanish counterpart, Mariano Rajoy, refusing to sign off on a €120bn growth package until EU paymaster Germany approved short-term measures to ease their cost of credit.