European leaders agree to have a single banking regulator

Christian Hartmann/Reuters - France and Germany clashed during Thursday’s meetings, which stretched into the early hours of Friday in Brussels. German Chancellor Angela Merkel endorsed creating a powerful European official who would have veto power over national budgets, while French President Francois Hollande accused her of paying more attention to her own domestic politics.

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Leaders also discussed Greece’s future in the euro, expressing a statement of support for the country without explicitly saying they would keep it in the currency union.
Bleary-eyed after a short night of sleep, leaders on Friday tried to emphasize their commonalities. But it was difficult for them to paper over the differences that kept them negotiating until the wee hours of the morning.
“This cannot be done in one or two months,” German Chancellor Angela Merkel told reporters on Friday. “These are tricky and difficult legal questions… the political will, at any rate, is there.”
Until a new regulator is up and running, leaders said, banks would not be able to receive aid directly from Europe’s bailout fund, likely leaving the Spanish government with the bill for its faltering financial sector. Leaders said that they did not discuss a broader bailout for Spain during the meeting, though diplomats said Thursday that the Spanish government appeared poised to ask for help within weeks.
The new banking regulator would delegate supervision of smaller banks to national oversight, a concession to German desires to shield their politically powerful regional banks in an election year and also a concession to the reality that it may be difficult to set up an entirely new regulatory operation over the course of just a few months.
The issue has been contentious, with politicians reluctant to give up national control over their banks and the powerful financial sector worried that European regulators might be less accommodating than local officials, who can be more susceptible to political influence.
But the agreement was in some ways a step back from a June summit in which European officials committed to institute a euro-zone banking supervisor by the end of 2012 without specifying how broad its powers would be.
France and Germany clashed during Thursday’s meetings, which stretched more than nine hours. Ahead of the summit, Merkel endorsed creating a powerful European official who would have veto power over national budgets, a major giveaway of sovereignty. French President Francois Hollande accused her of paying more attention to her own domestic politics than to what is best for the 17-nation euro zone. But after the meeting, the leaders said they were happy with the results.
“The worst is behind us,” Hollande told reporters. “But everything is not over yet because we have to restore confidence and growth.”