The stalled growth package at the European Union summit has received approval after European leaders agreed to support Italy and Spain.

European leaders agreed to address the ballooning borrowing costs of the two countries after their demand for short-term measures to be eased became a stumbling block for the €120bn (£96bn) growth package for the eurozone.

It took hours of tough negotiations to arrive at the deal at the EU crisis summit in Brussels. The possibility of reducing the risk premiums of the two countries' bonds was also discussed.

"There is a whole array of possible interventions and measures," said Luxembourg Prime Minister Jean-Claude Juncker, Bloomberg reported.

Earlier, Italian Prime Minister Mario Monti and his Spanish counterpart Mariano Rajoy refused to sign the package of measures, largely aimed at spurring growth and generating jobs.

A €10bn increase in the capital of the European Investment Bank will bolster the bank's overall lending capacity by €60bn, while the other half of the €120bn will come from reallocating unused structural funds, according to official reports.

Although the process itself was difficult, the outcome was good, Monti said. The countries have been asked to sign a memorandum setting out their commitments.

The leaders of all other countries agreed on the package. Germany was among those who feared that easing short-term interest rates would set back plans for growth.

European Council President Herman Van Rompuy announced the deal after the talks ran late into the night.

"Everyone must make an effort so that markets are convinced that the measures are effective, and they must be. We all need Italy and Spain to have lower interest rates today and for Spain's banks to be recapitalised because that will bring relief for the eurozone," French President Francois Hollande said.

Backing Italy and Spain, Hollande added: "We now need to have a stability policy in order to support the countries that took some efforts. Stability measures should be a priority before any other consideration."

The comments came as snub to Angela Merkel, the chancellor of the eurozone's paymaster Germany.

The European leaders also agreed on eurozeone banks being supervised by a single body that includes the European Central Bank to bring more financial stability to the region.

"We are opening the possibility to countries that are well behaving to make use of financial stability instruments in order to reassure markets and to get again some stability around some of the sovereign bonds of our member states," Rompuy said.