BRUSSELS — European leaders reached agreement Thursday on creating a single supervisor for banks in the countries that use the euro that will be up and running sometime next year, German diplomats said.
The deal reached at a summit of European leaders in Brussels represents a compromise between the Germans and French, who had been tussling over how best shore up the region's stricken banking system — one of the main causes of Europe's debt crisis. 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.
France has been pushing to get all 6,000 banks in the 17 countries that use the euro 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.
But Germany's Chancellor 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."
"There are a lot of very complicated legal questions, and I am not making the issue more difficult than it actually is," she told the German Bundestag on Thursday morning.Comment on this story
By the evening, however, German diplomats said agreement had been reached. The legal framework for a supervisor would be completed this year. The plan will be put into place next year, the two officials said. They would only speak on condition of anonymity in order to give details of discussions before an official announcement.
However, there are still more issues under debate at the summit, which runs until today.
Merkel is pushing a proposal for the EU'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.