Friday, October 19 07:35:08
Germany and France managed to overcome distinct differences on the issue of bank supervision, and Government sources here have welcomed the decision as helpful to Ireland's campaign to secure a deal on its bank debt. However the final communique, which came after a late-night meeting, was vague on when the new system would be deemed effectively operational. It is also unclear what criteria will be used to allow the European Stability Mechanism to recapitalise banks, and whether or not so-called legacy bank debt would be covered.
Only once the new mechanism is deemed effective can the ESM recapitalise banks, which European Central Bank President Mario Draghi said could take at least a couple of months. EU leaders have established a target of 1 January for the legal architecture to be in place to establish what is called a "single supervisory mechanism". At some point over the course of next year eurozone finance ministers will work out how the ECB should assume its new supervisory role, how many banks should be supervised, and how non-eurozone countries who want to join the euro will fit in.
Whether bank debt dating back to Ireland's property collapse will be covered will also have to be worked out sometime next year.