Eurozone crisis summit failed to resolve any substantial issues and shelved some big decisions until December and beyond
Ian Traynor in Brussels
The Guardian, Friday 19 October 2012 16.59 BST
The European Union looked condemned to months of bitter infighting over money, budgets and the euro on Friday following a summit where leaders merely papered over the deep divisions between them.
While claims of victory were routine and ubiquitous, chancellor Angela Merkel of Germany appeared highly satisfied with the minimalist outcome that failed to resolve any issues of substance and shelved some big decisions until December.
The main issues revolved around new regimes and institutions to help stabilise the euro longer term by enabling the use of bailout funds to shore up weak banks directly as well as putting the eurozone's banks under a new single supervisory agency, the European Central Bank.
While the leaders decided to agree the legal framework on the new banking supervisor by January during a fraught session that dragged on until after 3am on Friday, all other substantial and highly contested matters were left largely untouched.
With the pressure from the financial markets on the euro and on the borrowing costs of weak single currency members relatively low, it appeared that EU leaders felt less need to take bolder decisions.
If the January deadline is met — a big if, given the web of complex and controversial issues entailed in designing an effective banking supervisor for the eurozone while meeting the objections of the 10 countries not in the currency — it will then take several months at least for the supervisory authority to be functioning.
That, in turn, means that it will be at least a year before the eurozone can tackle the sovereign debt crisis more fundamentally by pouring bailout funds directly into ailing banks without first lending to governments and worsening their debt burdens. The decision to take this action came in June at a previous summit but became swiftly engulfed in confusion and dispute. The meeting on Thursday and Friday failed to dispel the confusion and bring clarity.
All the signs were that, barring a re-eruption of the crisis in the markets, substantial eurozone action would have to wait until Merkel is probably re-elected to a third term in September next year.
President François Hollande of France, who came to the summit with an anti-Berlin agenda, accusing Merkel of being too guided in her crisis management by domestic German politics, said she had her own deadline for euro crisis action – 13 September 2013, the German general election.
Merkel denied this utterly. "I hadn't even thought of that. That's just not right," she said.
But Jean-Claude Juncker, the prime minister of Luxembourg, confirmed that the creation of the new safety and rescue regime for eurozone banks was likely to take a while.
"The detailed questions of what should be done how, when and by whom will be tackled in the course of 2013. I hope in the first quarter but it can get dragged into autumn."
And Merkel also left herself plenty of wriggle-room for delays: "There are complicated questions to clarify and we'll see in December if we complete it or not."
The summit featured the first big clash in the three-year crisis between Germany and France, highlighting how the troubles over the single currency and sovereign debt have moved to the very heart of the EU.
Hollande's key aim was to speed up the establishment of the new banking regime, while Merkel emphasised "quality over speed" as part of her delaying tactics.
The result was a compromise that favoured the French on the timeline, but Merkel on the substance.
Arguably the biggest loser was Spain, the biggest worry in the eurozone, since it became clear that it would not benefit in the foreseeable future from the direct bank recapitalisation which may not kick in now until 2014.
Spanish diplomats told the French news agency AFP that they had given up hope of being able to tap the bailout fund for the banks without having the loans put on the government books adding to Spain's debt level.
Merkel made clear that any direct bank recapitalization, if and when it is allowed, would not be retroactive and could only be applied for future contingencies. Hollande had tried and failed to have the policy made retroactive.
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