BRUSSELS (AP) — European finance ministers inched toward strengthening their banking sectors and the management of their economies at a meeting in Brussels on Tuesday, but put off decisions on comprehensive solutions to the region's financial crisis.
Weakness in the banking sector and inadequate monitoring of national budgets were among the prime causes of Europe's three-year crisis, which has seen several countries struggle with too much debt. Fixing those areas is crucial not only to ending the current crisis but also preventing a repeat.
European leaders have agreed, in theory, to cede significant amounts of sovereignty to fix those problems. As part of this plan, the European Central Bank will be put in charge of all of the banks in the 17 countries that use the euro by as early as next year. And they have proposed giving the European Commission, the European Union's executive arm, the power to review and even reject their national budgets to prevent against overspending.
But actually implementing those ideas has proved difficult. Germany, for instance, is wary of ceding control over its banks while Britain is nervous that a coordinated eurozone banking sector will have a greater say in discussions over regulations that apply to all 27 nations of the EU. And several countries are concerned about the voter backlash that would be sparked by handing too much power to the Commission.
After months of heightened activity over banking and economic oversight — a move that markets and investors have largely welcomed — it seems the EU has now put on the brakes while it hammers out the details.
Austrian Finance Minister Maria Fekter said, for instance, that creating a single supervisor for all the banks may require a time-consuming treaty change. That would knock the EU way off its timeline of getting a supervisor at least partially in place next year.
"I don't want to speed up without having discussed the best solution," she said. "Speed kills when we don't have the best solution."
It's unclear how long markets will wait, though. Official figures due later this week are expected to show the eurozone fell into recession — technically defined as two consecutive quarters of economic contraction — in the third quarter. Even Germany, the continent's largest economy, is slowing, as was evident in an unexpected drop in the ZEW survey of investor confidence on Tuesday.
"There is still the same lack of urgency that has sent the markets into a frenzy on numerous occasions in the past few years," said James Hughes, chief market analyst, for Alpari.
Meanwhile, Spain's banks desperately need an infusion of cash and are hoping to get it from the European bailout fund. But they won't be allowed to until they are under the watchful eye of the ECB. So any delay in setting up the supervisor system would delay a Spanish rescue.
Michel Barnier, the EU commissioner charged with drafting the bank supervisor plans, said that the commission is committed to getting a supervisor in place next year, although it could be improved by a treaty change down the road.
Monday night's discussions among just the 17 eurozone ministers were also mired in disagreements that have held up the next installment of bailout money for Greece. The discussion faltered over the timeline for bringing Greece's debts down to a manageable level.
The European Commission wants to give Greece until 2022 to reduce its debt to 120 percent of gross domestic product; while the International Monetary Fund — another part of the troika of international debt inspectors along with the ECB and EU — wants to stick to the original deadline of 2020.
The meeting did agree to give Greece until 2016 — that is, two more years — to make the reforms necessary to right its economy and begin reducing its debts. But Greece's creditors still have to decide how they will pay for the extension; officials have said it will cost about €30 billion extra through 2016.
German Finance Minister Wolfgang Schaeuble suggested Tuesday that the hole could be plugged by lowering the interest rates of the loans. Economists don't think that will be enough and have suggested eurozone countries should accept losses on their loans — something Schaeuble ruled out.
While it waits for its next batch of loans, Greece has had to raise money from financial markets to be able to repay €5 billion in bonds maturing Friday. It managed to get €4.06 billion from the sale of short-term bills on Tuesday. It will accept more bids until Thursday, by which time it expects to have gathered enough to afford Friday's bond repayment.