France, Italy, Spain unite against Germany

France supported Italy and Spain against Germany in their demand for immediate borrowing-cost relief as a divided leaders' summit was to begin its final day. "We all need Italy and Spain to have lower interest rates today and for Spain's banks to be recapitalized because that will bring relief for the eurozone," French President Francois Hollande told reporters early Friday as the tense first day of a two-day European Union leaders summit in Brussels broke up after midnight. "We now need to have a stability policy in order to support the countries that took some efforts [to shore up their public finances]," Hollande said, referring to Italy and Spain. "Stability measures should be a priority before any other consideration." He said he supported Italy and Spain's increasingly dire demand for short-term measures to lower their dangerously high borrowing costs, saying the measures would stabilize the eurozone. Benchmark Italian 10-year bonds, used to set rates on other loans, yielded 6.2 percent Thursday, while comparable Spanish bonds yielded 6.9 percent. The yields represent the costs of government borrowing. Yields near 7 percent are considered by many to be unsustainable. Hollande confirmed Italy and Spain threatened to withhold approval of a flagship $149 billion EU stimulus growth and jobs pact unless eurozone leaders came up with a deal to lower their financing costs. Italian Prime Minister Mario Monti and Spanish Prime Minister and government President Mariano Rajoy asked for eurozone rescue funds and the European Central Bank to intervene more aggressively on financial markets to buy Spanish and Italian bonds, to ease the very high yields the two countries have been forced to pay on their sovereign debt. German Chancellor Angela Merkel -- who rejected their pleas for immediate relief -- canceled her late-night news briefing after telling the 27 EU leaders such an approach threatened to derail the whole summit. "It became really tense," a senior EU official told the Financial Times. "Everyone thinks it is extremely unlikely they will find a deal on short-term measures." Dutch Prime Minister Mark Rutte, who supported Merkel, told reporters the only way Spain and Italy could emerge from the crisis was "to bite the bullet." European Council President Herman Van Rompuy insisted Italy and Spain had not created gridlock. "There are two countries who are very keen to make sure that there is an agreement, both on the long-term measures and on the short-term measures, but I wouldn't say there was any blockage," he told a news conference amid reports of summit disarray.