Diplomats: EU chiefs agree on bank supervisor
BRUSSELS -- European Union leaders announced early Friday they had agreed to create a single supervisor for banks in countries that use the euro, and said it would "probably" become operational sometime next year.
The deal, reached at a summit of EU leaders in Brussels, represents a shaky compromise between the Germans and French, who had been tussling over how to shore up the eurozone's banking system.
France has been pushing to get all 6,000 banks in the 17 euro countries under the supervision of one European body by the end of this year. But Germany's Chancellor Merkel, wary of using taxpayers' money to prop up other countries' banks, tried to put the brakes on the plan.
European Council president Herman Van Rompuy said the single supervisor would "probably" be up and running next year.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
European leaders reached agreement Thursday on creating a single supervisor for banks in the countries that use the euro that will be up and running sometime next year, German diplomats said.
The deal reached at a summit of European leaders in Brussels represents a compromise between the Germans and French, who had been tussling over how best shore up the region's stricken banking system _ one of the main causes of Europe's debt crisis. In Ireland's case, the government's attempts to rescue failing banks forced it into a bailout. Some fear Spain could face that fate, too.
France has been pushing to get all 6,000 banks in the 17 countries that use the euro under the supervision of one European body by the end of this year. Leaders agreed in June that, once a supervisor is in place, struggling financial institutions would be able to tap Europe's emergency bailout fund, the European Stability Mechanism, directly. At the moment, money to help put banks has to go through a country's government _ placing more strain on state finances.
But Germany's Chancellor Merkel, wary of using taxpayers' money to prop up other countries' banks, tried to put the brakes on the plan, insisting that creating the supervisor should be done slowly and that "quality must come before speed".
"There are a lot of very complicated legal questions, and I am not making the issue more difficult than it actually is," she told the German Bundestag Thursday morning.
By the evening, however, German diplomats said agreement had been reached. The legal framework for a supervisor would be completed this year. The plan will be put into place sometime next year, the two officials said. They would only speak on condition of anonymity in order to give details of discussions before an official announcement.
However, there are still more issues under debate at the summit, which runs until Friday.
Merkel is pushing a proposal for the European Union's monetary affairs commissioner to become an enforcer of the bloc's budget rules _ including the power to refuse member countries' proposed spending and tax plans and send them back for changes.
Germany hopes that having a "budget czar" _ a move that's been bandied about for months _ will help keep Europe from repeating past mistakes by stopping governments from overspending and needing expensive bailouts. But some countries, like France, are wary of handing control over their finances to unelected officials in a foreign capital.
"I am astonished that, no sooner does someone make a progressive proposal ... the cry immediately comes that this won't work, Germany is isolated, we can't do it," Merkel said in Parliament ahead of the summit.
On arrival Thursday, President Francois Hollande of France _ increasingly the counterpoint to Germany's weight in the EU _ brushed off the suggestion as simply not on the table at this summit.
With unemployment in the region at a record 10.5 percent, and growth grinding to a halt around the continent, the back-and-forth is beginning to frustrate some European officials. Jose Manuel Barroso, who is president of the EU's executive arm, the European Commission, criticized the heel-dragging ahead of the meeting.
"There is not all over Europe the same sense of urgency," said Barroso.
With no relief in sight for beleaguered Spain, the question of whether it will ask for a bailout itself will likely be discussed. The government in Madrid said this week that it would decide in the coming weeks _ although it is still hoping it can avoid asking for any kind of aid.
But the political pressure on Spain is great because should investors become convinced that Madrid will not request aid, they may once again sell off the country's bonds, causing its borrowing rates to rise. If Spain were to be locked out of bond markets because of excessively high rates, the 17 countries that make up the eurozone would have to rescue it at huge financial cost.
"It would be helpful ... if Spain asked for ESM aid," said Herman Van Rompuy, who is president of the European Council, the body composed of the leaders of all the EU countries. "But it is up to Spain to make up its mind."
Leaders could also discuss Greece, where rioters were pelting police with Molotov cocktails and chunks of marble on Thursday to protest the stringent budget cuts the country has had to implement to secure its rescue loans.
Greece's bailout creditors _ the EU, the International Monetary Fund and the European Central Bank _ have been engaged in tough negotiations in recent weeks over more budget cuts. The group of creditors, known collectively as the troika, has said it won't release the next batch of loans until more savings are made. Without those loans, Greece will default and probably be forced to leave the eurozone.
Budget cuts have been blamed for sinking many countries in Europe into recession and have unleashed protests around the continent.
Van Rompuy said countries were starting to see the first positive effects of austerity, with deficit levels down and borrowing costs falling. But countries "are still suffering a lot," he said. Some 25 million people are without a job in the EU and economic growth prospects are weak.
Long-term proposals for overhauling the EU will likely be key topics of debate in Brussels. They include creating a European budget that could be used to support countries going through deep recessions _ as Spain and Greece are now. That idea appeared in a report Van Rompuy put together for the summit, but has met with some stiff opposition.
Raf Casert and Robert Wielaard in Brussels and Geir Moulson in Berlin contributed to this story.