France, Germany bury hatchet to nail EU bank deal

by Herve Asquin
German Chancellor Angela Merkel (R) and French President Francois Hollande (2R) in Brussels on December 13, 2012
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German Chancellor Angela Merkel (R) and French President Francois Hollande (2R) are pictured during a roundtable meeting at the EU Headquarters on December 13, 2012 in Brussels.

France and Germany, seemingly set on divergent political paths, pulled out all the stops Thursday to lay the symbolic foundation stone towards greater eurozone integration.

Settled in a 14-hour negotiating marathon, the dawn deal to set up a new watchdog for lenders is a key step towards a cherished goal of "banking union," the bedrock of a more closely-integrated European Union better able to withstand future financial crises.

But Berlin and Paris were as divided initially on the scale and scope of the Single Supervisory Mechanism (SSM) as their leaders are on the political right and left -- a trait that led analysts to worry that the eurozone would slump back into inertia awaiting September 2013 polls in Germany.

"At the beginning, let's say it openly, we were far apart ... but we came to this meeting (of European finance ministers) with positions which were very close," French Finance Minister Pierre Moscovici told AFP.

Berlin favoured a slow but steady approach beginning with the biggest banks only, while Paris wanted all lenders included from the start.

"Our teams have been in constant contact and we got in touch just before the meeting to bring our views into line" so as to avoid an anticipated confrontation, Moscovici said.

And so in the end, the ECB will have to right to intervene in cases involving smaller banks, although in practice supervision will usually be left to national officials.

A senior German government official told a briefing on Wednesday that the two sides had come together in the run-up to the meeting so as to give every chance that there would be an accord.

In "24 hours, we managed to lay down the first block for the banking union," Moscovici said, offering fulsome praise to his German counterpart Wolfgang Schaeuble.

"We are not of the same age, we don't have the same temperament, we don't share the same political views but we have found a solid, a strong way of working together.

"I value his courage and his talent," he said.

Arriving Thursday for the summit of all 27 EU leaders after the banking deal was announced, Socialist French President Francois Hollande hailed "the good work and the good compromise."

Going into a bilateral meeting with conservative German Chancellor Angela Merkel, Hollande said the two sides had overcome ideology and delivered for the common good.

"We had thought that Germany might hold up the banking union but it avoided doing so and I thank the German government," the French president said.

Moscovici took pains however to dispel any notion that the two countries, the traditional power partners in Europe, shared all the same views.

"I am not describing (that) ... I am describing a shared willingness to work together and a growing closeness" where it matters, he said.

"That does not mean that there will not be any future differences, we are not giving up our positions," he underlined.

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