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Earlier, France's economy minister Christine Lagarde, speaking to Reuters Insider television in Paris, had thrown her weight behind rapid publication of stress tests, saying French banks had strong balance sheets and nothing to hide.
The run-up to Thursday's EU summit in
But leaders sought to play down
Markets across Europe received a boost when
The euro shot towards $1.24, its highest level in three weeks, and the premium investors' demand to hold Spanish bonds rather than German benchmark issues narrowed from a record high of over 230 basis points to 212.
European shares gained for a seventh straight session, riding bullish bank shares to a near five-week peak.
"The strong demand for Spanish bonds should help restore confidence," said Ciaran O'Hagan, a strategist at Societe Generale.
To reassure investors,
The publication of bank stress tests could also help calm jittery investors as long as the results don't reveal unexpected holes in banks' books. A European Union source said the tests would not be unveiled this month, but both
"If someone suspects you have an illness, it's all very well to say 'No, no, no, I'm very healthy,' but it's even better if you say 'OK fine, take my blood and make sure that I'm healthy'," Lagarde said, saying the results should be made public ideally before the end of July.
Germany, home to regional Landesbanken that were hit hard by the global financial crisis and have yet to fully recover, had been concerned it could be forced to recapitalise ailing institutions.
European Central Bank governing council member Erkki Liikanen said trust would return if the stress tests were made public. His French colleague Christian Noyer said they should be broken down by country and bank.
At their summit, the EU leaders hope to overcome differences on how to strengthen budget discipline and economic policy coordination to convince financial markets they can prevent a repeat of the debt crisis which started in
Germany's chancellor Angela Merkel and France's president Nicolas Sarkozy reached a compromise after talks in
Sarkozy bowed to German demands for tougher budget rules and accepted that euro zone states which persistently breach deficit limits should have their voting rights in the bloc suspended, even if that required treaty changes.
He also accepted, at Merkel's insistence, that all 27 EU member states, and not just the 16 that share the euro, should be involved in "economic government" to coordinate policies. He dropped French demands for dedicated euro zone secretariat.
The leaders were also expected to try to agree a common EU stance on a bank levy and financial transaction tax ahead of a G20 meeting on June 26-27, but may struggle to win support for those measures from other G20 members, including host
On Wednesday,
Both are the sort of structural reforms recommended by the executive European Commission and by economists to adapt European economies to global competition and an ageing population, and to make public finances more sustainable.
But they face opposition from trade unions which see them as an assault on workers' rights and plan protest strikes.
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