Thursday has brought an early morning deal between EU finance ministers on a new banking supervisor. It is a single but important step towards a full banking union.
European finance ministers struck a deal in the early hours on Thursday to give the European Central Bank (ECB) new supervisory powers over eurozone banks.
"We have a deal," confirmed an EU official. The news immediately impacted on the markets, sending the euro to a high of 1.3080 against the U.S. dollar.
After 14 hours of heated talks, finance ministers came to an agreement which would give the ECB power to police the biggest banks in the eurozone and intervene in struggling smaller banks.
Earlier, ministers had been oprimistic about coming to an agreement. "We have worked out proposals," German Finance Minister Wolfgang Schäuble said on his arrival for the talks in Brussels with the 26 other finance ministers belonging to the bloc.
"Our positions when we enter this meeting are closer than they were, but we must find an agreement not between us, but all 27," said French Finance Minister Pierre Moscovici.
His counterpart for Luxembourg, Luc Frienden shared that sentiment. "It is very important that any compromise solution also takes into account that all countries in Europe have the same voice and that it cannot be that some large states decide for the others," Frieden said.
As part of broad plans to create a banking union, EU finance ministers had been under pressure to create a framework for a banking supervisor by the end of the year. Analysts had warned that a failure could send negative waves through the financial markets.
If the European Parliament provides its assent to the banking supervisor deal, the ECB should begin its task of monitoring Europe's largest banks from March 2013. It would be responsible for up to 6,000 banks from January 2014.
Such an achievement would be one of the EU's biggest since the debt crisis began. It could also help to snip away at the “doom loop” between debt-ridden banks and destabilized governments.
But it would still constitute only one chapter in the banking union saga - apart from the banking supervisor, a resolution authority, a fund for collapsed banks and coordinating deposit guarantee schemes to prevent bank runs will all be crucial ingredients for a comprehensive solution to Europe's banking crisis. Building such an architecture is likely to take several years.
sej/jm (dpa, Reuters)