Merkel, Hollande clash on EU budgets before summit

Germany and France, Europe’s two central powers, clashed over greater European Union control of national budgets and moves towards a single banking supervisor before a summit of the bloc’s leaders began yesterday. German Chancellor Angela Merkel demanded stronger authority for the executive European Commission to veto national budgets that breach EU rules, but French President Francois Hollande said the issue was not on the summit agenda and the priority was to get moving on a European banking union. The two leaders met privately for 30 minutes just before the start of the 22nd EU summit since the eurozone’s debt crisis erupted nearly three years ago. Afterwards, a French source said they had agreed on the need for a tight timetable for introducing banking union. Addressing parliament in Berlin earlier, Merkel sought to slow the race to create a single European banking supervisor, saying quality was more important than speed. Reluctant to see its politically sensitive regional Landesbanks and savings banks come under outside supervision, Germany says European oversight should cover big cross-border banks only, and rejects any joint deposit guarantee under which richer countries might underwrite banks in poorer counterparts. Hollande told reporters: “The topic of this summit is not the fiscal union but the banking union, so the only decision that will be taken is to set up a banking union by the end of the year and especially the banking supervision.” Asked why he thought Merkel was dragging her feet, Hollande said it could be related to Germany’s electoral calendar, with elections due in September 2013, adding that the two dominant EU powers had a duty to solve the crisis. In her speech to parliament, Merkel skirted the issue of a possible credit line for Spain, which eurozone officials expect Madrid to request within weeks, but reiterated her desire to keep Greece in the currency area despite chronic debt problems. “We have made good progress on strengthening fiscal discipline with the fiscal pact but we are of the opinion, and I speak for the whole German government on this, that we could go a step further by giving Europe real rights of intervention in national budgets,” Merkel told the Bundestag lower house. A proposal by German Finance Minister Wolfgang Schaeuble to create a super-empowered European currency commissioner was a possible way forward, she said, and more European control called for a stronger European Parliament. Such moves would require EU treaty changes, which Hollande is keen to avoid.