The eurozone's proposed banking supervisor should
be fully operational by 2014, according to an EU report on economic
and monetary union published Thursday, which did not envisage the
introduction of eurobonds to stabilize the currency bloc.
Member states had pledged to agree on the fundamentals of joint banking supervision by the end of the year, in order to implement it over the following 12 months.
But EU diplomats said Thursday that it could take several more weeks to agree to a legal framework - pushing the deal beyond an end-of-year deadline - after finance ministers abandoned negotiations earlier this week.
One of the sticking points is Germany's insistence that many of its regional banks should not fall directly under the supervisor, while France and other countries argue that it must apply to all of the eurozone's approximately 6,000 banks.
"It is imperative that the preparatory work can start in earnest at the beginning of 2013, so that the SSM (single supervisory mechanism) can be fully operational from 1 January 2014," read the report prepared by EU President Herman Van Rompuy.
The supervisor is a prerequisite for the eurozone's permanent bailout mechanism to directly refinance ailing banks - the "legal and operational framework" for which should be in place by the end of March 2013, according to the report.
The 15-page document outlines three stages to accomplish economic and monetary union in the next two years and beyond.
It includes proposals for eurozone member states to enter into direct contractual reform pledges with the European Commission, the bloc's executive; a bank resolution fund at the European level to unburden taxpayers; and a eurozone "fiscal capacity" to absorb country-specific economic shocks.
The document makes no reference, however, to joint eurozone debt issuance, or eurobonds. Germany is strictly against the proposal, which is championed by France and southern European states.
EU diplomats argued Thursday that eurobonds would not be necessary because the establishment of a joint fiscal capacity would provide enough resources to stabilize the currency bloc.
"A euro area fiscal capacity could ... offer an appropriate basis for common debt issuance without resorting to the mutualization of sovereign debt," Van Rompuy's report stated.
However it remained vague on the funding for a fiscal capacity - separate from the EU budget - which could take the form of "national contributions, own resources or a combination of both," but "should not lead to an increase in expenditure or taxation levels."
The report, which is to be discussed at next week's summit of EU leaders, includes input from commission President Jose Manuel Barroso, the head of the Eurogroup of eurozone finance ministers Jean-Claude Juncker and European Central Bank President Mario Draghi.
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