Baku, July 2 (AZERTAC). Our initial assessment of the summit of EU leaders held in Brussels this week is that it has exceeded expectations, although these were low, and marks a positive step that eases near-term pressure on eurozone sovereign ratings, Fitch Ratings says. In our view, resolving the eurozone debt crisis will take a long time. Implementation risk on the measures agreed at the summit and on those already agreed is high. The prolonged nature of the crisis, which is likely to continue to be punctuated by episodes of severe financial market volatility, will weigh on the economic outlook for the region. Meanwhile, governments must deliver fiscal consolidation and structural reforms to underpin confidence in debt sustainability and medium-term growth prospects. Eurozone leaders` decision to create a `single supervisory mechanism` for banks is an important step towards ensuring the long-run viability of the euro. Once such a mechanism has been created, the soon to be established European Stability Mechanism (ESM) could recapitalise banks directly. In Fitch`s opinion, the creation of a single pan-eurozone bank supervisor with the power to intervene and, if necessary, directly capitalise banks could greatly improve the functioning of Economic and Monetary Union (EMU). By weakening the link between the financial health of banks and their domestic sovereign governments, it will enhance the effectiveness of ECB monetary policies and moderate the vicious cycle between sovereign and bank creditworthiness that has been a pernicious feature of the eurozone debt crisis. The timing and extent to which the burden of bank support will be shared is uncertain and this will be critical for some sovereign ratings. Sharing the fiscal cost of bank recapitalisation and support across eurozone member states could materially enhance the sovereign credit profile of Spain (`BBB`/Negative), Ireland (`BBB+`/Negative) and Cyprus (`BB+`/Negative). Friday`s summit statement says the European Commission will present proposals "shortly" and asks the European Council to consider them "as a matter of urgency, by the end of 2012." Effective and timely implementation of so-called banking union will be crucial and will have to be complemented by greater fiscal and political integration to shore up confidence in the long-run future of EMU. In the near-term, the decision to respond to Spain`s request for financial assistance to recapitalise its banks with EFSF (`AAA`) funds that do not formally enjoy preferred creditor status and to waive such status as such funding is transferred to the ESM will ease sovereign investor concerns over subordination. The decision to allow financial support for sovereigns from the EFSF/ESM under the policy conditionality implied by existing EU and eurozone fiscal and economic rules rather than requiring the imposition of more stringent and intrusive conditionality associated with a full EU-IMF `bail-out` programme is also a positive development. While conditionality provides a policy anchor, the greater flexibility of EFSF/ESM financial assistance could help sovereigns retain market access. The total capacity of the EFSF/ESM is small relative to Italian and Spanish sovereign borrowing requirements, but they could operate as anchor investors to encourage private sector participation. The summit statement does not elaborate on how to achieve the "qualitative move towards fiscal union" described in European Council President, Herman Van Rompuy`s, pre-summit report, which was the clearest acknowledgement so far of the extent of the reforms needed to make EMU viable. It also recognised that a great deal of detailed work was required, including possible Treaty changes, and that the timescale for achieving this could be as long as ten years.