Eurozone finance ministers have agreed to offer 30 billion euros (about 37 billion U.S. dollars) by the end of this month to save Spain's troubled banks.

Though far from being a breakthrough, the decision made on Tuesday has bought the country's struggling banking industry more time to deal with its problems.

SWIFT DECISION & GRAVE SITUATION

Eurogroup President Jean-Claude Juncker told reporters after the finance ministers' meeting that the organization expects the aid package to be finalized by July 20 and that Madrid is likely to get the fund, the first tranche of a 100-billion-euro (123-billion-dollar) bailout, by the end of the month.

The ministers also agreed at the meeting to extend the deadline for the correction of Spain's excessive deficit by one year to 2014, Juncker said.

Juncker spoke hours after European Union (EU) officials said the European Commission would propose allowing Spain to relax its deficit target for 2012 to 6.3 percent of gross domestic product (GDP), an increase from an earlier target of 5.3 percent.

Under the terms, Spain will need to reduce its budget deficit in 2013 to 4.5 percent of GDP instead of 3 percent, and to 2.8 percent by the end of 2014.

Hans Martens, chief executive of the European Policy Center, said the agreements, although not a major breakthrough, are still an important step in the right direction.

BREAK "VICIOUS CYCLE"

Olli Rehn, the EU economic and monetary affairs commissioner, told the finance ministers that, according to the agreement reached at a eurozone summit last month in Brussels, the European Commission (EC) is responsible for drafting the proposals concerning the establishment of a "Single Supervisory Mechanism."

The mechanism, Rehn said, was expected to be set up by the end of the year.

He also said the supervisory mechanism will effectively break the "vicious cycle" between the ailing banking industry and sovereign risk.

The collapse of Spain's real estate bubble has left the country's banks with mounting bad loans, which has pressured public finances and driven up the yields of its national debt.

Nicolas Veron, Bruegel senior fellow and visiting fellow at the Peterson Institute for International Economics, said the timing was not too late.

Veron said that what was more important is how strong a proposal the EC could put forward and what kind of signals it would send to the market.

He also said the market, which has become ever more impatient, wants concrete measures. If investors have the impression that the eurozone nations cannot keep faith with the agreement made at the EU Brussels summit, turbulence will be seen in the market in the coming weeks.

MORE NEEDS TO BE DONE

Klaus Regling, CEO of the European Financial Stability Facility (EFSF), said the EFSF and Spain have discussed the signing of a deal which involved detailed terms for bailout loans, including the dates to transfer and to return the credit.

He also signed a series of agreements with European Central Bank (ECB) President Mario Draghi. According to the deal, the ECB will act as the EFSF's finance agent to operate in secondary market, especially in bonds.

Regling added that such an arrangement would shield the ECB's balance sheet from market turbulence, while the EFSF would take all the risks and profits.

Martens said the ECB has sufficient experience and means at its disposal to play such a role. There is no need, he said, to set up another independent system. Moreover, the ECB's participation could also increase the EFSF's credibility.

Veron said although it is a big breakthrough to allow the European Stability Mechanism to directly inject capital into the banks, they are still not sure how the agreement will be implemented because the move will bring huge changes to Europe's banking industry.

He added there is still much work needed to be done because the eurozone nations still have to tackle many technical and political problems.