BRUSSELS—European Union leaders struck a compromise on a roadmap to establish a single bank supervisor for the euro zone after Germany and France papered over differences on priorities for overcoming the bloc’s debt crisis. Diplomats reading from the text of draft conclusions of an EU summit in Brussels yesterday said the leaders agreed on “the objective of completing the legal framework by the end of the year” with implementation “in the course of 2013”.
The point when the European Central Bank will effectively become the bloc’s banking supervisor is important because it would open the way for the euro zone’s bailout fund to recapitalise troubled banks directly, without adding to governments’ debts. EU Economic and Monetary Affairs Commissioner Olli Rehn said this was vital “to break the vicious circle between sovereigns and banks”.
The deal, which leaves uncertainty over the scope of a European banking union, came after the leaders of Germany and France, Europe’s two central powers, clashed over greater EU control of national budgets as well as bank supervision.
German Chancellor Angela Merkel demanded stronger authority for the executive European Commission to veto national budgets that breach EU rules, but French President Francois Hollande said the issue was not on the summit agenda and the priority was to get moving on a European banking union.
The two leaders met privately just before the start of the 22nd EU summit since the euro zone’s debt crisis erupted nearly three years ago. For once, the meeting was not under the intense pressure of financial markets, which have calmed since the ECB pledged last month to intervene decisively if needed to buy bonds of troubled euro zone states to preserve the euro.
Addressing parliament in Berlin earlier in the day, Merkel said quality was more important than speed in creating a new banking supervisor. Germany is loath to see its politically sensitive savings and co-operative banks come under outside supervision and says European oversight should cover big cross-border banks only.
It rejects any joint deposit guarantee under which richer countries might have to underwrite banks in poorer states. Asked why he thought Merkel was dragging her feet, Hollande told reporters it could be related to Germany’s electoral calendar, with a general election due in September 2013, adding that the two dominant EU powers had a duty to solve the crisis.
In her speech to parliament, Merkel skirted the issue of a possible credit line for Spain, which euro zone officials expect Madrid to request within weeks, but reiterated her desire to keep Greece in the currency area despite chronic debt problems.
In Athens, police clashed with protesters hurling stones and petrol bombs during a general strike that brought much of the near-bankrupt country to a standstill. “We have made good progress on strengthening fiscal discipline with the fiscal pact but we are of the opinion, and I speak for the whole German government on this, that we could go a step further by giving Europe real rights of intervention in national budgets,” Merkel told the Bundestag lower house.
A proposal by German Finance Minister Wolfgang Schaeuble to create a super-empowered European currency commissioner was a possible way forward, she said, and more European control called for a stronger European Parliament. Such moves would require EU treaty changes, which Hollande is keen to avoid. (Reuters)