Taoiseach Enda Kenny will travel to Brussels for a crucial summit of EU leaders focused on reforming Europe’s banks and protecting the single currency.
A significant first step towards what is called a eurozone banking union was agreed last night by EU finance ministers, after 14 hours of talks.
The ministers agreed that the European Central Bank will be allowed to supervise some of the eurozone’s largest banks, and have the power to intervene if smaller banks show any signs of distress.
After three years of piecemeal crisis-fighting measures, agreeing on a banking union lays a cornerstone of wider economic union.
It marks the first concerted attempt to integrate the bloc’s response to problem banks.
The new system of supervision should be up and running by the end of next year, although ministers agreed that could be delayed if the ECB needed longer to prepare itself.
The plan sets in motion one of the biggest overhauls of any European banking system since the financial crisis began in mid-2007 with the near collapse of German lender IKB.
The onus is now on EU leaders, who meet in Brussels today and tomorrow, to give their full political backing.
In a dramatic U-turn, German Finance Minister Wolfgang Schaeuble ditched his earlier objections that had led him to clash openly with his French counterpart, Pierre Moscovici, last week over the ECB’s role in banking supervision.
With time running out to meet a year-end deadline, both sides managed to settle their differences.
Germany won concessions to temper the authority of the ECB’s Governing Council over the new supervisor.
Agreement on bank surveillance is a crucial first step towards a broader “banking union,” or common euro zone approach to dealing with failing banks, that in recent years dragged down countries such as Ireland and Spain.
The next pillar of a banking union would be the creation of a central system to close troubled banks.
The decision also sends a strong signal to investors that the eurozone’s 17 members, from powerful Germany to stricken Greece, can pull together to tackle the bloc’s problems.