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2012-10-20 06:21:17
The French president says a deal to start building a banking union on 1 January
will enable the eurozone to speed up economic integration.
"Thanks to this we can advance more quickly and with more assurance," Francois
Hollande said in Brussels.
He was speaking after EU leaders agreed to set up a single banking supervisor
for the 17-nation eurozone - a key step towards a banking union.
But Mr Hollande also said EU states "need different speeds" of integration.
"We should have a council of the eurozone to meet on a regular basis... We need
different speeds - that's agreed by everyone now, and there are even some
moving backwards," he told a news conference.
Germany's Chancellor Angela Merkel insisted again that "quality takes
precedence over speed" in setting up the banking union.
New ECB clout
It has been agreed that the European Central Bank (ECB), as
supervisor-in-chief, will have the power to intervene in any of the eurozone's
6,000 banks.
The deal appears to be a compromise between France and Germany, who earlier
disagreed over the timing and over the number of banks the ECB would oversee.
Start Quote
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image of Gavin Hewitt Gavin Hewitt Europe editor
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A legislative framework is to be in place by 1 January, with the supervisory
body starting work later in 2013.
The timetable remains important, because only when the body is fully
operational will the eurozone's new rescue fund, the European Stability
Mechanism (ESM), be able to recapitalise struggling banks directly, without
adding to a country's sovereign debt pile.
A priority is to rescue weak banks in Spain, where a recent audit put the
bailout requirement at 59.3bn euros ( 48.3bn; $77.4bn).
But the Greek crisis also looms large, as the EU awaits a key report from the
"troika" of international lenders - the ECB, European Commission and
International Monetary Fund.
Mr Hollande insisted that "Greece's presence in the eurozone should not be
questioned any more" and Mrs Merkel said the Greek government was "really
making an all-out effort" to reform its economy.
Meanwhile, Spain's main trade unions have called a general strike for 14
November, coinciding with similar protests in Portugal and Greece.
'Ambitious roadmap'
Berlin wanted to apply the brakes over the banking union and much wrangling
lies ahead, the BBC's Europe editor Gavin Hewitt says.
Mrs Merkel insisted on Friday that "the right sequence is important" and added:
"It's already quite an ambitious roadmap."
Germany had been at odds with the European Commission over the scope of the
proposed ECB supervision. All the eurozone banks will be included - but Germany
had wanted it limited to the biggest, "systemic" banks.
Previously, the German government has expressed a desire to retain supervisory
responsibility within Germany over the country's Landesbanks - state-owned
banks that play a key role in the economies and state finances of Germany's
federal regions.
European Council President Herman Van Rompuy said the 27 EU leaders had agreed
to set up "a Single Supervisory Mechanism [SSM], to prevent banking risks and
cross-border contagion from emerging".
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"Once this is agreed, the SSM could probably be effectively operational in the
course of 2013," he said.
With new supervisory powers the ECB would be able to act early on to prevent a
systemically dangerous accumulation of debt on a bank's balance sheets.
UK concerns
ECB supervision will not extend to the UK - Europe's main financial centre, but
outside the euro.
However, the BBC's Business editor Robert Peston says there is now a serious
risk that the UK will always be outvoted when decisions are taken on the
regulation of banking and finance in the EU as a whole.
It is more than a theoretical possibility that the interests of the UK and City
of London in shaping financial rules will be systematically ignored or
overridden, he says. The UK also wants safeguards to protect the powers of the
Bank of England.
Mrs Merkel said the agreement was that "banks must be supervised in a
differentiated way. That means that some will be direct... at the ECB level and
others indirectly, via the national authorities."
She also said that ECB President Mario Draghi had told her it would be some
months before the ECB was ready to take on its new role.
Fraught with complications
The leaders agreed that the ECB's new supervisory function would be strictly
separated from its role in setting monetary policy.
The banking union plan is fraught with legal complications, as it would give
more powers to the ECB and possibly weaken those of national regulators.
There is speculation that it could lead to treaty changes - something that has
caused big headaches for the EU in the past.
The EU Commission said the arrangement would be "as inclusive as legally
possible for non-euro members to join if they want to".