Did EU Leaders Actually Deliver A Fiscal And Banking Union At The Summit?

BRUSSELS/BERLIN – Germany signaled on Wednesday it was ready to back plans for the European Central Bank to be made the chief supervisor of banks, raising the prospect of a breakthrough on the European Union’s most ambitious financial reform. Finance Minister Wolfgang Schaeuble told the German cabinet he was “optimistic” about a deal ahead of a meeting of EU finance ministers in Brussels on Wednesday, a German official said, speaking on condition of anonymity.

BRUSSELS – The European Union reached a landmark deal on Thursday to make the European Central Bank the bloc’s top banking supervisor, giving EU leaders greater confidence that they are gaining the upper hand over the eurozone’s debt crisis. EU finance ministers forged a deal on the single supervisor in the early hours of Thursday after marathon talks. Leaders will give their stamp of approval at a summit starting later in the day, their last of 2012, and also discuss closer fiscal ties for their troubled currency area.

In the too stupid to make up category, Rajoy defends ‘victory’ for EU credibility Mariano Rajoy, the embattled Spanish prime minister, has defended the eurozone’s €100bn bailout for Spanish banks as a victory for European credibility.

By Colin Lokey:Upon the conclusion of the EU Summit, several foolishly hopeful observers (myself among them) concluded that European policymakers' decision to allow the European Stability Mechanism (ESM) to directly recapitalize struggling eurozone financial institutions represented a potentially game-changing realization on the part of Europe's leaders.

In spite of all the headlines and chatter the real winner in the latest of 19 EU summits was none other than German Chancellor Angela Merkel. First lets take a look at numerous headlines that got the story wrong. Merkel Big Loser

Futures are flying over a "breakthrough" that supposedly will lower borrowing costs for Italy, Spain, and Ireland.  The "breakthrough" is a modification to the terms of the ESM to allow "the possibility" to recapitalize banks directly. Amusingly, the existing ESM agreement has not even been ratified. The agreement is still on hold in Germany (numerous other countries have yet to ratify as well).

Goldman Sachs is out with a reaction to the Cyprus bailout deal negotiated over the weekend, the most controversial part of which entails a haircut on bank deposits, something that hasn't yet been seen until now in the euro crisis saga.

There was progress of sorts at the EU summit in Brussels last week, with European Union leaders agreeing to set up a single bank supervisor for the 17 countries that use the euro.   The deal represents a compromise between the Germans and the French: the body will supervise all 6,000 lenders in the euro zone, as the French had required, but there is no exact starting date, which seems to suit the Germans who prefer the go-slow approach.