European leaders agreed to press on with further steps to shore up their finances and sustain momentum in tackling the debt crisis on Friday, a day after clinching a deal on banking supervision and approving long-delayed aid to Greece.
After more than eight hours of late-night talks at a summit in Brussels, leaders promised to push ahead with setting up a mechanism to wind down problem banks, although it was unclear when the facility would be completed.
They also launched tentative discussions on how to make countries stick to economic targets and on creating a «solidarity fund» to help member states suffering one-off economic shocks, but did not delve deeply into either issue, pushing the debate out to the middle of next year.
With officials concerned about complacency creeping into decision-making now that financial markets have calmed and the crisis seems less acute, leaders appeared intent on showing that they are not relaxing.
That said, no concrete decisions were taken at the summit. Instead, it was more about verbal commitments to push ahead.
“This evening we decided to put in place a single resolution mechanism,» Herman Van Rompuy, the president of the European Council and chairman of the summit, told a news conference.
The European Commission will present a proposal on the mechanism, which would wind-up troubled banks by keeping the good parts alive while the unhealthy operations are shut down, during 2013, Commission President Jose Manuel Barroso said.
French President Francois Hollande told reporters the mechanism would «see the light of day» during the year, but it was not clear whether he expected it to be functioning by then or merely be in the early stages of construction.
“We agreed a roadmap for the future development of the currency union,» said German Chancellor Angela Merkel, without going into detail about the discussions.
The two-day summit, the sixth and last of 2012, had only ever been intended to be a detailed discussion on how best to overhaul economic and monetary union and correct the problems that have fuelled three years of debt crisis.
The meeting was held just hours after EU finance ministers achieved a significant breakthrough in negotiations over a ‘banking union’ by agreeing that the European Central Bank would be made the chief supervisor of euro zone banks.
That decision, and another by euro zone ministers to release up to 50 billion euros in new aid to Greece, marked two positive developments after a long year of crisis-management and took some of the pressure off leaders to make major strides.
ECB President Mario Draghi hailed the deal on banking supervision, the first stage towards a banking union with more pooled sovereignty, as an important step towards a stable economic and monetary union.
Under the deal, officials said the ECB would regulate some 150 to 200 banks directly – all major cross-border lenders and state aided institutions – with the power to delve into all 6,000 banks in case of problems.
Olli Rehn, the EU commissioner for economic and monetary affairs, said «Cassandras» who had predicted disaster for the euro and a Greek exit had been proven wrong.
But there is little time to relax. The next stages of banking union – creating a resolution fund for winding up troubled banks and coordinating deposit guarantees to protect savers – may be fought over even harder. And then there will be political and financial hurdles to negotiate through the year.
“The fact that the situation in the financial markets is now better than before should not be seen by the governments as a way to procrastinate,» European Commission President Jose Manuel Barroso told reporters.
Much of southern Europe faces another year of grinding recession with record unemployment and deepening poverty that will tear at the fabric of wounded societies and may push governments’ efforts to reduce deficits further off course.
With Silvio Berlusconi vowing to contest an Italian election early next year, a full bailout of Spain still on the cards and a German election in September casting a long shadow, 2013 promises to be the EU’s fourth turbulent year in a row, even without risks from bailout victims Greece, Ireland and Portugal.
Italy is a particular concern if the next government rows back on any of the economic reforms put in place by technocrat Prime Minister Mario Monti, whose time in office has helped stabilise financial markets and stave off the crisis.
Several participants at a pre-summit meeting of centre-right leaders in Brussels urged Monti to stand as a candidate in an election expected in February, but he gave no indication of his intentions, a person at the meeting said.
Many European leaders fear a return of the erratic billionaire Berlusconi, who abruptly changed course on Wednesday, saying he would step aside if Monti agreed to lead the centre-right into the election.