EU leaders endorse eurozone banking supervisor

The measure, which had caused friction between France and Germany, is a prerequisite for the eurozone's bailout mechanism to directly assist troubled banks. It is seen as key to restoring trust in the common currency area amid its debt crisis.
Germany and a few other countries had argued that a year-end target to introduce the supervisor was not realistic and would create false expectations, while France had demanded rapid action.
As a compromise, the leaders decided to push for "swift progress with the objective of agreeing on the legislative framework by January 1, 2013," said EU President Herman Van Rompuy.
"Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013," he added.
German Chancellor Angela Merkel said it would take more than one or two months to get the supervisor up and running.
Direct bank recapitalisations would then be possible once the mechanism has proven to be effective, Van Rompuy said.
Welcoming the deal, French President Francois Hollande said: "It was a good deal we found tonight. To act as quickly as possibly with the best possible level of supervision."
Merkel cautioned: "First the legal framework must stand. After all, we don't want to disappoint the markets."
The leaders tasked finance ministers with thrashing out the details. Hollande said he expected a summit in December to give its final seal of approval to the supervision mechanism.
But there could be more haggling ahead as member states disagree on how to define "effective" supervision. Germany has also sought to limit the scope to the eurozone's largest banks, rather than applying it to all 6,000.
In an apparent concession to Berlin, Hollande said that in certain cases - for instance for regional banks - the supervision work could be carried out by national authorities on behalf of the eurozone regulator.
Merkel noted there would be "differentiated supervision," but European Commission President Jose Manuel Barroso said that no financial institution would be beyond the supervisor's reach."
The new supervisor will be able to intervene, if needed, in any bank in the euro area," Barroso said, adding that the system would be "as legally inclusive as possible" for non-euro member states that wanted to join.
Hollande said talks on how to balance the eurozone supervisor with the concerns of the EU's 10 non-euro members had dominated much of the discussion.
In the run-up to the meeting, Germany proposed far-reaching powers for the EU's monetary affairs commissioner. But the idea gained no traction in Brussels - with Hollande among those rejecting it as superfluous.
Banking aid recipient Spain had originally pushed for direct bank recapitalisations - and thus the banking supervision - because it wanted disbursements to circumvent Madrid and stay off government balance sheets.
Diplomats said that during the discussions Spain no longer considered this an urgent issue, saying instead that the focus should first be on setting up an effective banking supervisor.
Leaders also welcomed the "good progress" Greece had made in implementing reforms and austerity measures to curb its debt crisis, but warned Athens to stick to its reform path to "ensure its future in the euro area."
The meeting took place against a backdrop of rising social unrest in southern Europe fuelled by austerity measures to rein in debt and deficits.
In Greece, clashes broke out between youth hurling petrol bombs and riot police at a large anti-austerity demonstration in central Athens on Thursday, where one demonstrator died of a heart attack.
European Parliament President Martin Schulz warned of the "extremism and radicalism" that can go hand in hand with "the explosive desperation" felt amid dim job prospects and crumbling social infrastructure.