European leaders agreed early on Friday to have a new supervisor for eurozone banks up and running next year, a step that will pave the way for the bloc's bailout fund to pump capital directly into banks throughout the single-currency area.

Direct recapitalisation of banks by the bailout fund is seen as a crucial step in the eurozone's response to its debt crisis. Eurozone officials say it would help solve the problem of governments with weak public finances such as Spain being unable to support their national banking systems. The bloc has pledged to allow its bailout fund, the European Stability Mechanism, to recapitalise banks directly, but only once the supervisor is operating effectively.