Angela Merkel makes François Hollande wait for banking watchdog

German Chancellor delays release of bailout funds for Spanish banks

European leaders decided yesterday to create a single supervisor for all 6,000 banks in the eurozone next year but disappointed the markets, and the Spanish government, by failing to agree an early starting date.

A single banking authority is regarded by Madrid – but also by Paris and Rome – as a vital step in the laborious three-year struggle to resolve the debt crisis in southern Europe and to save the euro from disintegration.

The German Chancellor, Angela Merkel, gave some ground yesterday but opposed rapid implantation of the new banking watchdog and blocked agreement on an early use of European bailout funds to rescue failing banks.

The deal reached in Brussels eased tensions between France and Germany but produced a classic EU compromise: two steps forward and one step back and plenty of scope for more quarrels.

Both France and Germany claimed victory but financial markets were disappointed that the leaders had failed to relieve market pressure on Spain by allowing eurozone bailout funds, reserved for insolvent governments, to rebuild the balance sheets of struggling banks.

Chancellor Merkel fought off pressure from the French President, François Hollande, and others for the new banking authority – agreed in principle last June – to start work from January, or soon afterwards. Instead, the EU leaders "agreed to agree" the details of the banking watchdog by the end of this year and to hand over banking supervision by the end of 2013.

French officials said that this should clear the way for a European "recapitalisation" of the Spanish banking industry in the first months of the new year. German officials insisted that this could not happen until the new banking authority was fully up and running – in other words not before the end of the year and not before the German federal election next autumn.

Ms Merkel gave some ground by dropping her insistence that German regional savings banks should be exempted from the new arrangements. It was agreed that all 6,000 banks in the eurozone should come under the supervision of a new authority under the umbrella of the European Central Bank – even if national or local supervisors remained in place.

At a summit press conference, she rejected suggestions her rearguard action was driven by the fear new EU assistance for southern countries could lose her votes in the autumn. "This is a bad insinuation," she said. "I have no link in mind."

A eurozone banking authority and direct aid to banks are seen by France and by other countries – including Britain – as crucial steps towards rebuilding confidence in the single European currency.

Under the present rules, only national governments can rescue struggling banks but, by doing so, they add to their own debt mountains.

Mr Hollande, insisted the agreement brought the eurozone nearer to an end of almost three years of crisis.

"Tonight, I have the confirmation that the worst is behind us," he said. "We are on track to solve the problems that for too long have been paralysing the eurozone."

Financial markets gave a more lukewarm response yesterday. However, both Spain and Italy have managed to borrow large sums of money at relatively low interest rates in recent days suggesting the eurozone crisis may, at least, be passing into a less acute phase.

But deep worries remain about Greece. The summit failed to give a clear signal that Athens would receive a new €31.5bn tranche of aid but the final communique saluted "progress" made by the Greek government in its "adjustment" – in other words, austerity – programme.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Voices
Focus E15 Mothers led a protest to highlight the lack of affordable housing in London
voicesLondon’s housing crisis amounts to an abuse of human rights, says Grace Dent
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Warehouse Operations & Logistics Manager

£38000 - £42000 per annum: Recruitment Genius: One of the UK's best performing...

Recruitment Genius: GeoDatabase Specialist - Hazard Modelling

£35000 - £43000 per annum: Recruitment Genius: Our award-winning client is one...

Recruitment Genius: Compressed Air Pipework Installation Engineer

£15000 - £21000 per annum: Recruitment Genius: This leading provider of Atlas ...

Recruitment Genius: Operations Coordinator - Pallet Network

£18000 - £20000 per annum: Recruitment Genius: Opportunity to join established...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea