BRUSSELS, June 29 | Fri Jun 29, 2012 5:16am EDT

BRUSSELS, June 29 (Reuters) - European Union leaders resume their summit on Friday just hours after euro zone members agreed to use the single currency's bailout funds to bring down borrowing costs for struggling countries.
Italy and Spain had demanded emergency action for fear of being shut out of capital markets, and the summit was also to address long-term plans for closer fiscal and banking union.
Following are comments by EU leaders before Friday's talks:
GERMAN CHANCELLOR ANGELA MERKEL
ON CONDITIONALITY FOR BOND-BUYING BY BAILOUT FUNDS:
"We have taken important decisions last night. First we agreed that if countries need the instruments to buy bonds on the primary or secondary market from the EFSF or ESM then the conditionality will be agreed as follows:
"The country report will be presented to the Commission on which basis we will agree a memorandum of understanding in which there will be a time-frame. The EU/IMF 'troika' will then supervise, as it is always usual in the EFSF and ESM, whether the conditions are met.
"That would be the case if Spain or Italy, with regards to their interest burden, make use of such instruments. Then this conditionality would apply, which we have agreed on precisely, according to the rules we have."
ON CONDITIONALITY OF SUPPORT FOR BANKS:
"We are completely sticking to our scheme: benefit, counter-benefit, conditionality and control. I think we have done something important but remained faithful to our philosophy: no benefit without counter-benefit."
ON SPANISH SUPPORT:
"Secondly, regarding the banking recapitalisation which Spain has requested, a request will be made with the EFSF. Once the ESM becomes available, then the application will be transferred to the ESM. The seniority of the bonds will not be changed. For Spain we won't do what is otherwise applicable in the ESM regarding the preferred creditor status because the request was made through the EFSF, where such details do not apply."
AUSTRIAN CHANCELLOR WERNER FAYMANN
ON LONG- AND SHORT-TERM MEASURES:
"I'm satisfied, because I wished, like others, for a strengthening of the rescue mechanism. I think we will still need a provision for banks in the medium term so a stronger recapitalisation is possible.
"But just to have achieved what we have achieved shows that everybody wanted the euro zone to exist and to be stable and that's a good sign.
"It's good that we debated it together and didn't start with the long term and finish with the short term; it took some time but it was worth it.
"If a country in need asks why we first talk about long-term measures and then the short-term ones, it is only fair to suggest that we take the two together. That's how much respect there should be for every single member state."
BRITISH PRIME MINISTER DAVID CAMERON
"I think the countries of the euro zone did take some important steps forward last night.
"For a long time we've been saying more action needs to be taken for short-term financial stability, more to recapitalise banks, to use firewalls, to drive down bond spreads and interest rates to create greater stability, and I think they took some important steps forward last night and I very much applaud that.
"There's still important work to do, and that's what we'll be doing today."
FRENCH PRESIDENT FRANCOIS HOLLANDE
ON THE AGREEMENTS REACHED:
"There were three advances. The first is on the recapitalisation of the banks with banking supervision and with a calendar. The second is to allow easier solutions for Spain, which can be put into effect rapidly. And finally, there will be full use of the (bailout) instruments, the EFSF and the ESM, to give states that have made efforts the necessary protection in relation to interest rates."
ON THE IMPORTANCE OF WHAT EU LEADERS DECIDED:
"It is very important that we put into motion procedures for immediate action - something that was much hoped for. Bank supervision for a recapitalisation of the banks will take a bit more time, but this will be a lasting move in the right direction.
"We defined a vision for the euro - for economic and monetary union - saying what we will do together, and there will be greater solidarity at each step in integration. The banking union was the first illustration of this."
LITHUANIAN PRESIDENT DALIA GRYBAUSKAITE
ON IMPACT OF EURO ZONE DEAL ON SHORT-TERM BOND SUPPORT:
"We are heading for a future where we will need very general supervisory bodies to look more carefully, more strictly, and (which are) more responsible for the financial sector and banking sector, and that's where we are heading.
"I hope that in a very few weeks, the euro zone leaders will be able to find a concrete mechanism for how to control the not-very-well-behaving banks and to help them."

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