European Union leaders struck a deal Thursday on
the creation of a joint banking supervisor for the eurozone, but it
was not clear whether France or Germany had won in a standoff over
competing demands.
The measure is a prerequisite for the eurozone's bailout mechanism
to directly assist troubled banks and is seen as key to restoring
trust in the common currency area amid its debt crisis.
The leaders decided that a "legislative framework" for the banking
supervisor would be agreed by the end of the year, with a gradual
implementation to follow in 2013, European Commission officials said.
This replaced the wording of a draft summit declaration, which had
called for legislative proposals to be completed by December 31. It
was not immediately clear whether the deal would still allow the
banking supervisor to take up its work on January 1.
Germany and a handful of other countries had argued that the
timetable was not realistic and would create false expectations.
But France arrived at the summit demanding swift agreement on the
banking supervisor, pitting the bloc's traditional power tandem
against one another.
"The only decision we have to take, to confirm in fact, is the
establishment of the banking union by the end of the year and notably
the first stage, which is banking supervision," French President
Francois Hollande said earlier in the day.
Addressing the German parliament on Thursday morning, Chancellor
Angela Merkel had insisted that "quality is more important than
speed."
"We have to work very fast, but also very thoroughly," Merkel
reiterated as she arrived in Brussels.
Merkel and Hollande met separately behind closed doors as they
arrived for the summit, before entering into hours of negotiations
with their 25 EU counterparts.
Banking aid recipient Spain was one of the countries originally
pushing for a quick agreement on banking supervision, because it
wanted the disbursements to circumvent Madrid and stay off government
balance sheets.
But diplomats said during the course of the summit that Spain no
longer considered this an urgent issue, saying instead that the focus
should first be on setting up an effective banking supervisor.
It is the first step towards deeper integration of the eurozone,
but much of the detail remains to be hammered out.
"There are a lot of questions and uncertainties in the concept,"
Lithuanian President Dalia Grybauskaite said at the start of the
summit.
Sweden, a non-euro country that has to give its blessing for the
banking supervision plans to proceed, wants them to specify "who is
recapitalizing ... and who is paying" if a bank is in trouble, Prime
Minister Fredrik Reinfeldt said.
"Because that's what the market wants to know and my taxpayers
want to know," he said. "If you don't do this right, you don't solve
any problems regarding markets or anything else."
Czech Prime Minister Petr Necas had threatened to block the
proposal unless he was granted "guarantees" to protect his country's
banking sector.
Hollande arrived at the summit suggesting that national timetables
were hampering negotiations, referring to Germany's "electoral
calendar." Merkel is up for reelection in 11 months' time.
"I can understand this difference in calendar but we have a common
responsibility, France and Germany," Hollande said.
The summit agenda did not include Spain, speculated to need a
market intervention to keep borrowing costs in check, while little
more than a passing reference to developments in Greece was expected.
The meeting took place against a backdrop of rising social unrest
in southern Europe, where austerity measures to rein in debts and
deficits are biting.
In Greece, violent clashes broke out between youths hurling petrol
bombs and riot police at a large anti-austerity demonstration in
central Athens on Thursday, where one demonstrator died of a heart
attack.
European Parliament President Martin Schulz warned of the
"extremism and radicalism" that can go hand in hand with "the
explosive desperation" felt amid dim job prospects and crumbling
social infrastructures.
European Commission President Jose Manuel Barroso said more had to
be done to stimulate employment and growth.
"We need to balance the important efforts made in terms of sound
public finances with the right measures to have growth-enhancing
policies," he said.
