Yves Logghe, Associated Press
BRUSSELS — European leaders took a step toward creating a single supervisor for banks in countries that use the euro on Friday but refused to pin down a start date.
Although the leaders meeting in Brussels said their decisions on the watchdog — the single supervisory mechanism — were key to shoring up lenders and eventually giving them access to loans from Europe's bailout fund, many observers were struggling to figure out exactly what had been achieved.
Rather than finding new measures to fight the crisis, the leaders focused on establishing a timeline for those they had already agreed to.
"It is good for Europe that we'll have a single supervisory mechanism up and running in the course of 2013," Herman Van Rompuy, president of the European Council, which includes the leaders of all 27 EU countries, said Friday.
That appeared to go half a step further than the statement the EU heads of state and government adopted after all-night negotiations, which only committed to trying to get a plan for the banking supervisor in place by Jan. 1 and working in 2013 on getting it operational.
The supervisor needs to be up and running before European countries can work on the next big step in their crisis-fighting plan — giving their bailout fund, the European Stability Mechanism, the power to rescue banks directly, bypassing national governments.
That step is crucial because banks remain at the core of Europe's financial problems. Many are teetering on the brink of bankruptcy after the investments they made up in boom times — including in government bonds and real estate — plummeted in value. Some governments have stepped in to save their banks, only to worsen their own finances in the process.
European leaders want to shield troubled governments from the burden of supporting their troubled banks. That would be a huge relief to countries like Spain, which are facing the prospect of taking on enormous debts — and worrying markets in the process — in order to bail out their banks.
"The objective is simple: we want to break this relationship between the management — often the poor management — of banks and the consequences for state budgets," Belgian Prime Minister Elio Di Rupo said as he headed into the second day of a summit meeting in Brussels.
But the answer is not simple. Some countries, led by France and Italy, are pushing for the bailout fund to be given the power to loan money to banks directly. But in order to get that power, banks first need to be under the supervision of the European Central Bank — hence the urgency of settling the details about the single supervisor.
The compromise included something for both sides — all 6,000 banks in the eurozone will be included, as France had wanted, as well as a mention that leaders would try to get a legal framework for the supervisor in place by Jan. 1.
But there is no firm deadline for the single supervisor to be up and running.
Analysts were struggling to see what was new.
"The real question then is whether this is a step towards allowing the European bailout funds to recapitalize banks directly and thus reduce the link between an individual sovereign and its banking system," said Gary Jenkins of Swordfish Research. "The answer appears to be 'yes' although we have of course been here before."
Leaders pushing for a quick resolution on the bank supervisor declared victory on Friday.
"The new system will begin in 2013, and by that year it will operate recapitalizing the banks without the direct participation of governments," said Italian Premier Mario Monti.
- Ex-MLB hurler winds up for Vermont governor...
- Delegates in hand, Trump says he's got GOP...
- Court upholds $3M judgment against Gerber...
- UN envoy to Syria: Peace talks not set to...
- Origin of key Clinton emails from report are...
- McDonald's CEO says company is making...
- CDC urges speed on Zika as House moves to...
- Slain college student's mother leads...
- Are Utahns tiring of Mitt Romney... 110
- Why the University of Miami plans to... 45
- Utah and 10 states sue Obama... 42
- Delegates in hand, Trump says he's got... 33
- In Hiroshima, Obama honors 'silent cry'... 25
- Donald Trump breaks with nation's only... 17
- Trump tells California 'there is no... 17
- Trump: Those in US illegally treated... 15