Finance Ministers of the euro area have reached a political understanding on the draft Memorandum of Understanding (MoU) underlying the financial assistance for the recapitalisation of financial institutions for Spain, to be provided via the EFSF until the ESM becomes available. In addition, they also supports the Commission's recommendation to extend the deadline for the correction of the excessive deficit in Spain by one year to 2014.

The Eurogroup has given the first step to make the financial assistance for the recapitalisation of financial institutions for Spain available. In 26 of June, the President of the Eurogroup confirmed the request for financial assistance from Spain. On 9 of July, Finance Ministers of the euro area have reached a political understanding on the draft Memorandum of Understanding (MoU). This means that the financial assistance to Spain will be provided via the European Financial Stability Facility (EFSF) until the European Stability Mechanism (ESM) becomes available. Ministers also agreed to discuss in September that the future ESM will be a direct bank recapitalisation instrument, i.e. in order to break the vicious circle between banks and sovereigns, the ESM will have the possibility to recapitalise banks directly once an effective single supervisory mechanism is established.

In addition to this, the ECB and EFSF have signed on the same day a technical agency agreement, creating the possibility of an efficient conduct of market operations by the EFSF. As soon as the ESM has been established, a similar agreement will be concluded between the ECB and ESM. Ministers also welcomed the Commission's intention to present proposals in early September, for a single supervisory mechanism involving the ECB. They expect the Council to consider these proposals as a matter of urgency by the end of 2012.

With regard to other countries, the Eurogroup has requested the Troika to work together with the Portuguese authorities during the fifth review mission that will start on 28 August so as to ensure that the adjustment process remains on track. Ministers also took note that a fully-fledged programme is expected to be negotiated with the Cypriot authorities.