Thursday, December 13, 2012

AND YET another 'historical' step in the Eurozone:

Europe took its first big step towards banking union early on Thursday morning, as eurozone finance ministers agreed a plan to cede power to a common bank supervisor in Frankfurt.

After almost four months of fraught diplomacy that laid bare deep Franco-German divisions, finance ministers brokered terms for the European Central Bank to begin direct supervision of up to 200 eurozone lenders from early 2014.

The reform requires governments to surrender jealously guarded control over national banks, in the most concerted financial integration project since the creation of the single currency.

At the same time, Britain, Sweden and other non-eurozone countries outside the banking union won coveted safeguards to check the power of the ECB and maintain some influence over technical standards applying to all EU banks.

The supervision plan is the first – and probably the easiest – step towards a eurozone banking union designed to shore up confidence, resuscitate cross-border bank lending and bring down painfully high borrowing costs for banks in peripheral eurozone countries.