Europe nears deal to make ECB chief bank watchdog

Wed Dec 12, 2012 5:53pm EST
 
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By John O'Donnell and Robin Emmott

BRUSSELS (Reuters) - European governments neared a deal on Wednesday to give the European Central Bank new powers to supervise banks across the bloc after Germany signaled a readiness to compromise on the scope of the ambitious financial reform.

Last week German Finance Minister Wolfgang Schaeuble had clashed openly with his French counterpart Pierre Moscovici over key elements of the plan, but with time running out to meet a year-end deadline, they narrowed their differences, raising hopes of a breakthrough.

Agreement on a common bank supervisor is a crucial first step towards a broader "banking union", or common euro zone approach to dealing with failing banks that in recent years have dragged down countries like Ireland and Spain.

"We think that we have a good chance to reach a deal today," Schaeuble told journalists ahead of a meeting in Brussels with his European Union peers. "My intention is that we find a solution to the banking union on time before Christmas."

Moscovici told his colleagues in the meeting that "all the parameters" for an agreement were in place.

Even if the bloc is able to settle most of its differences on Wednesday, other difficult issues remain.

At a summit in June, EU leaders pledged that once a common bank supervisor was in place, the bloc's rescue mechanism would have the power to directly recapitalize struggling institutions.

Countries like France, Italy and Spain are keen for those powers to be in place as soon as possible. But Germany, worried it could be forced to foot the bill for struggling banks across the bloc, is not in a rush.   Continued...

 
Spain's Economy Minister Luis de Guindos listens to Austria's Finance Minister Maria Fekter (R) during an European Union finance ministers meeting in Brussels December 12, 2012. REUTERS/Francois Lenoir