European Union leaders agree to create eurozone-wide bank regulator

 

European Union leaders have announced they had agreed to create a single supervisor for banks in countries that use the euro — without saying when it would become fully operational.

The deal, reached at a summit of EU leaders in Brussels, represented a shaky compromise between the Germans and French, who had been tussling over how to shore up the eurozone's stricken banking system — one of the main causes of Europe's debt crisis.

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. 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. 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.

But Germany's Chancellor Angela 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”.

The compromise included something for both — all 6,000 banks will be included, as France had wanted. But there is no firm deadline for the single supervisor to be up and running — other than to say that the “objective” is to finish the legal framework by January 1, and that work on its operational implementation “will take place during the course of 2013.”

“It is not because you vote on a law that you have the whole logistic framework in place the day after,” said Van Rompuy.

Despite the lack of a deadline, French President Francois Hollande hailed the agreement.

“The worst is over,” he said, referring to the crisis that has shaking the European Union to its roots.

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.

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.

In addition, with no relief in sight for beleaguered Spain, the question of whether it will ask for a bailout itself looms. 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 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 also praised the progress it said Greece had made toward reforming its economy and balancing its budget, though, without a new report by international lenders, no decision could be taken on badly needed continued aid for country.

On Thursday, rioters in Athens pelted 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.

Associated Press

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
Independent
Travel Shop
the manor
Up to 70% off luxury travel
on city breaks Find out more
santorini
Up to 70% off luxury travel
on chic beach resorts Find out more
sardina foodie
Up to 70% off luxury travel
on country retreats Find out more
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

IT Auditor

competitive: Progressive Recruitment: IT Auditor , Information Governance, NHS...

Process Improvement Analyst (Testing)

£40000 - £45000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Service Delivery Manager - Derivatives, Support,

Negotiable: Harrington Starr: Service Delivery Manager - (Derivatives, Support...

WPF .NET Developer

£300 - £350 per day: Harrington Starr: WPF Analyst Programmer NET, WPF, C#, M...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform