Leaders of the European Union in Brussels have agreed October 18, to a deal for a eurozone-wide banking supervisor in 2013 that is designed to help prevent future catastrophic bank failures that could threaten the monetary union.
The agreement sets the stage for development of a legal framework to allow the European Central Bank to give emergency funds to ailing banks directly without going through national governments — bailouts which, in turn, have required bailouts for the nations themselves, as was seen in Greece and Ireland.
The move is necessary to “break the vicious circle between banks and sovereigns,” said European Council President Herman Van Rompuy in a press conference early Friday.
“Next hurdle to set up a single supervisory mechanism to prevent banking risks and cross-border contagion from emerging … built with the integrity of the single market in mind.”
The leaders set a goal of approving the legislative framework by January 1, with the new supervisory mechanism “operational in the course of 2013,” Van Rompuy said.
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