EU summit: France says bank deal helps eurozone fusion

 

The BBC's Gavin Hewitt reports on the winners and losers in the deal

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.

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Compromising and fudging is the way business often gets done in Brussels”

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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.

Banking union - Three-stage plan

  • Single supervisory mechanism (SSM)
  • Joint resolution scheme to wind down failing banks
  • Joint deposit guarantee scheme
'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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Sofia Palma Rodrigues

What the media do not do enough is study the reasons we are in this crisis”

End Quote Sofia Palma Rodrigues Portuguese journalist

"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".

 

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  • Comment number 230.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +5

    Comment number 229.

    216.davidmelamedoff
    Those favouring the second better take some valium. The UK has been trying to change CAP since we joined but have had no success. We tried changing the fishing regs with no success. As part of the EZ we couldn't have printed money through QE or reduced our interest rates. We would have been liable for a 100bil of bailout funds. Thx god we wasn't part of it.

  • rate this
    +6

    Comment number 228.

    A step further towards total centralised control of economies without any real thought for the outcome. Greater opportunity to go on bailing out weaker economies and failing banks at the expense of the stronger economies who are able to manage their affairs. Greater integration of weaker economies in to the centralised arena will onloy add to its downfall.

  • rate this
    0

    Comment number 227.

    206. Mabelode

    Time to join the USA.
    --------
    You mean that Fox Cameron Hague Gove et al were not already working for them?

  • rate this
    +1

    Comment number 226.

    Go now. Go now. Go now
    Before you see me cry.
    I don't want you to tell me
    Just what you intend to do now.
    'Cause how many times do I have to tell you
    Darling, darling,
    I'm still in love,
    Still in love,
    With you now?

    I don't want to see you go
    But, darling,
    You'd better go now.

  • rate this
    +4

    Comment number 225.

    The future looks very bleak under labour or the cons, they've let the unelected EU communists hold back Britain for too long.
    Britain used to be Great, now the plan is to make it a 'state' of europe!

    And it's about time the media got behind Britain and fought our corner, not bow down to eurocrat propaganda.

    Maybe it's time to look at the third option and vote UKIP, a vote for Britain.

  • rate this
    0

    Comment number 224.

    Adolph Hitler would be rubbing his hands in glee.

  • rate this
    +3

    Comment number 223.

    Re 191 Ted Heath Yes the Liar who put us all on this continually downward EU slide! Sadly setting a president for all the LIARS since! mostly a bunch of SELF serving career politcians on a gravy train!The EU is an even bigger example of nest feathering for the political class, WE have ALLOWED to run riot with others money! Theres a WHOLE world out there want UK products as there always has been!

  • rate this
    +6

    Comment number 222.

    Comment number 200.BelPaese
    5 Minutes ago

    Everytime a country voted against an EU treaty there were told to vote again and get the right answer. the french people voted against the treaty that created the euro.

    The EU is not democratic it is a elitist dictatorship!

  • rate this
    -2

    Comment number 221.

    I suspect the European Central Bank would do a better job of supervising our banks than the BoE or the FSA.
    If the Germans were running our banks I suspect that they would be more cautious, support manufacturing and less likely to create a consumer bubble.
    Alan

  • rate this
    +2

    Comment number 220.

    @210.Billythefirst

    Bloody expensive cake Billy !

    And Germany or France ?

    Do you not think that they are trying to shape things how they want ? That is what will suit them and their economies best ?
    Do they not want their cake and to eat it as well ?

  • rate this
    0

    Comment number 219.

    '"...we can then boot out the Government if that happened..."

    ===

    Didn't boot out the tories with their WTD opt-out, did you?'

    Sorry? I didn't vote for the Tories. The majority after a general election of the country didn't boot out the Tories, something I respect that is democracy. The EU is anything but.

  • rate this
    0

    Comment number 218.

    Lest we forget. It was a right wing Government that took us into Europe without asking us. It was a left wing Government that gave us the opportunity to leave.

  • rate this
    +1

    Comment number 217.

    The problem with the European Union is the lack of any formal system to tackle the problem of Racism and ethnicity.

    Britain has a formal system of ethnic classification which is used by the civil service and the Police. The careful management of ethnicity makes for a more stable society which in turn produces a better environment for international business and banking.

  • rate this
    -6

    Comment number 216.

    The UK depends on the EU for 52% of its trade, but represents only 8% of EU internal trade. If, after a particularly winding and bumpy road, the EuroZone succeeds in absorbing most of the EU, we will be left with 2 options:
    1- the UK’s 8% takes on the EU 52% over the negotiating table;
    2- the UK joins the EZ to change it from within.
    Those favouring the first better find some allies- fast.

  • rate this
    -4

    Comment number 215.

    204 BadlyPackedKebab
    "The UK is a net contributor to the EU and a net importer from the EU. We have over a million Europeans living and working the UK. What are we shunning"

    The point as I remember was if the UK has any title to enjoy the full trade partneship with the EU even if it decides to leave. Maybe or maybe not: out of the treaties out the protection they grant. You can't have it all

  • rate this
    -2

    Comment number 214.

    206.Mabelode

    "...Time to join the USA..."

    ===

    Cheerio, then.

  • rate this
    +3

    Comment number 213.

    Well what do you know, another power of the E.U. by the back door, I just wish ONE country would have the gets to pull out, preferably the U.K. and watch the whole shebang collapse like a pack of cards... without the money from the UK France & Germany cannot go it alone... Come on Mr Cameron, give us the vote - same as Scotland, a simple YES or NO..

  • rate this
    +5

    Comment number 212.

    "A hundred young European journalists have been attending workshops in Brussels designed to help them cover the economic and political crises currently engulfing the continent."

    Never automatically trust what you hear in the media about the Eurozone crisis, and always question what they have left out of their reports.

  • rate this
    -2

    Comment number 211.

    Yet again another law to be introduced without any real time studying it's implications. I fail to see how controlling banks will stabilise the EURO, which was also introduced without a complete study of the consequences unless of course there is a central control of budgets. This is the same control that Merkel wants and unfortuately the only solution.

 

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