European leaders today threw a lifeline to Spain - agreeing that its tottering banks should have direct access to EU bail out funds without adding to its government's debts.
The agreement in Brussels by the leaders of the 17 eurozone nations came in the early hours of the morning after Chancellor Angela Merkel appeared finally to relent in the face of concerted pressure.
Mrs Merkel had come to Brussels insisting that there would be no short term fixes on the table.
However Spanish prime minister Mariano Rajoy and Italy's Mario Monti made clear that they would block further progress at the unless they received assistance to curb their soaring borrowing costs.
Crucially, they appeared to have been backed by French president Francois Hollande, attending his first EU summit, who has said tough austerity measures to cut deficits must be backed by support for growth.
The "breakthrough" was announced by European Council President Herman van Rompuy after David Cameron and the leaders of the other nine non-eurozone members had left the summit, leaving the single currency bloc to thrash out a deal.
"We are opening the possibilities for countries that are well-behaving to make use of financial stability instruments ... in order to reassure markets and get again some stability around some of the sovereign bonds of our member states," Mr van Rompuy said.
He said that they had also agreed the establishment of a joint banking supervisory body for the eurozone.
Arriving yesterday in Brussels, Mr Cameron acknowledged the growing exasperation at the failure of the leaders of the 17 eurozone nations to reach a deal that would stabilise the single currency.
"I know people are frustrated that these summits keep happening and not enough decisions are made," he said.
"These are hard decisions for the eurozone countries to make and we should be encouraging them to go ahead."
The summit had expected to focus on a 10-year road map for reform of the eurozone setting out proposals for a banking union, fiscal union - leading ultimately to political union.
A report fleshing out the details of the plan will now be delivered to the next EU summit in October.
Mr van Rompuy said it 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.