Stocks were yesterday buoyed by European Commission President Jose Manuel Barroso’s five-point plan to save the eurozone. The speech was a precursor to what will take place next week during the European Council, to be held in Brussels.

The European Parliament also reacted enthusiastically to the plan. But what does it contain exactly?

The most crucial point, according to Mr Barroso is for decisive action to be taken on Greece so that “all doubt is removed” about the country’s economic sustainability. This includes freeing up the latest tranche of bailout funds. One must also add that since his speech, the Slovakian Parliament has reached a deal on the next bailout for Greece. The deal was reached in return for early elections and was merely a case of political wrangling.

And this brings us to the second point. Mr Barroso said it was imperative to implement the measures agreed in July (which Slovakia originally rejected). These include increasing the size of the EFSF to €440bn.

But by far the most crucial aspect of the plan is the recapitalisation of Europe’s banks. In the Barroso plan, it is envisaged that banks should set aside more assets to cover any losses which might be incurred. This would allow those same banks to be able to tap into the EFSF as a last resort.

This measure seems to be a compromise between the original vision set out by French President Nicolas Sarkozy and German Chancellor Angela Merkel. Mr Sarkozy originally wanted banks to be able to tap straight into the fund, but Mrs Merkel was, shall we say, less than enthusiastic. Under this new plan, it seems as though banks will be able to access the fund, but only if they have taken all the safeguard measures.

The EU also plans to try and stimulate growth within the bloc by embarking on free trade agreements. The most likely countries to enter such agreements would be Ukraine and Libya.

And finally, point number 5. Mr Barroso has finally hinted that there will be some form of eurozone regulatory body in Europe, as he announced that there would be “greater integration for economic governance across the eurozone”. This is the clearest indication yet that the penny has finally dropped in Brussels. It is simple, you cannot have 17 nations sharing a currency, yet all left to their own whims and devices in fiscal and economic policy. Greece, Ireland, Portugal, Spain and Italy are all living examples of this. As we have said, the markets have responded well to the pledge, but there are dangers and one of these is that simply throwing money at the problem will not help the issue. It has been argued that throwing public money at, for example, ailing banks might put further strain on national economies – France being the most vulnerable. Indeed, this is an echo of what, in the end, turned out to be a disastrous approach adopted by former British Labour Prime Minister Gordon Brown’s “spend your way out of recession”. That can never be allowed to repeat itself. While the impact of Britain’s near economic collapse was felt across the world in terms of trading, at least it did not directly have an impact on the euro currency. Thank Heavens. We will know more next week.