BERLIN (AP) — A group of German economists has denounced decisions made during last week's European Union summit, arguing Thursday that they risk increasing the exposure of taxpayers, retirees and savers to the debts of struggling banks.

EU leaders agreed in Brussels that the European bailout fund could in the future pump money directly into banks, rather than via governments, once an effective, independent European supervisor is established — meaning that the aid wouldn't further add to governments' debt burden.

Leaders also agreed in principle to let the fund buy government bonds to drive down countries' borrowing costs if they comply with EU economic recommendations — meaning that countries such as Italy, which are carrying through economic reforms but still face high borrowing rates, wouldn't face the kind of deep austerity programs required of Greece.

In an open letter published by the daily Frankfurter Allgemeine Zeitung, a group of 160 economists wrote that German Chancellor Angela Merkel found herself forced to make "wrong" decisions during the gathering. The economists said they "view the step toward a banking union, which means collective liability for the debts of the banks of the eurosystem, with great concern."

"Banks' debts are nearly three times higher than government debts ... the taxpayers, retirees and savers in the so-far solid countries of Europe must not be made liable for backing these debts, particularly since gigantic losses are foreseeable from financing the southern countries' inflationary economic bubbles," they added.

The economists include Hans-Werner Sinn, the head of the prominent Ifo think-tank and a vocal critic of European leaders' rescue policies. They argued that "banks must be allowed to fail," with creditors who knowingly took investment risks bearing the burden.

Merkel rejected the criticism.

"First of all, this is about better banking supervision, and one can only say that that is urgently necessary," she told reporters.

She cited Spain's banks — for which the country's government is seeking rescue loans of up to €100 billion ($126 billion) after they were hit hard by a burst property bubble — as an example of existing supervisors having failed to spot problems properly. The hope is that an international, independent supervisor wouldn't be prone to considering national or government interests.

"This is absolutely not about any additional liability," Merkel added.