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.
- 1 Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
- 2 The confessions of men who ordered mail-order brides
- 3 UK weather: Britain braced for snow as arctic air mass moves in
- 5 'Isis' schoolgirls: Missing British teenager tweets picture of her Syrian takeaway
Migrant crisis: Greek soldier saved 20 people singlehandedly off Rhodes beach
Aaron and Melissa Klein: Oregon anti-gay bakers ordered to pay $135,000 after refusing to make cake for same-sex wedding
UK weather: Britain braced for snow as arctic air mass moves in
Power of Nepal earthquake was equivalent to 20 huge atomic bombs
Nepal earthquake video: Terrifying footage shows moment avalanche hit Everest Base Camp
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband
The sickening truth about food banks that the Tories don't want you to know
Migrant boat disaster: Ukip candidate mocks victims in sickening Twitter post
Nigel Farage wants the BBC to stop making programmes like Doctor Who, Strictly Come Dancing, and Top Gear
Global warming: Scientists say temperatures could rise by 6C by 2100 and call for action ahead of UN meeting in Paris
General Election 2015: Britain would become a 'communist dictatorship' under Ed Miliband and Nicola Sturgeon, claims wife of Michael Gove
£30000 - £40000 per annum: Ashdown Group: Front-End Developer - Guildford/Craw...
£13500 - £15000 per annum: Recruitment Genius: A Customer Service Assistant is...
£16000 - £35000 per annum: Recruitment Genius: An ambitious and motivated Sale...
£20000 - £23000 per annum: Recruitment Genius: A Gas Installation Support Engi...