EU backs banking union, Greece bailout

By a Christmas window in Athens, a union By a Christmas window in Athens, a union poster calls for Dec. 19 strike and features a homeless man with a "no to poverty of the people" slogan. Rescue funds should soon be flowing to Greece. (Dec. 13, 2012) Photo Credit: Getty

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In one whirlwind morning Thursday, the European Union nations agreed to two key measures vital to the financial security of the region. As well as laying the groundwork for a full-fledged banking union, Greece's euro partners approved billions in bailout loans that will prevent the country from going bankrupt.

The measures, approved by European finance ministers, ended weeks of haggling over ways to deal with the three-year financial crisis. Their decisions freed up the 27 EU leaders gathering for their summit Thursday evening to concentrate on solving the region's other economic and financial problems.

"Europe and the eurozone have proved that they are capable of eliminating the challenges that confront them," said French President Francois Hollande.

A meeting of the 17 finance ministers from the EU countries that use the euro agreed early Thursday that Greece would get a total of 49.1 billion euros ($64 billion) between now and March, with 34.3 billion euros due in the coming days. Greece needs the money to stay afloat and avoid a calamitous default.

The approval of funds for Greece opens "the way for a return of confidence of investment, of growth and job creation," said Olli Rehn, the European commissioner for monetary affairs.

The gathering of eurozone ministers came just hours after a pre-dawn meeting of finance ministers from all 27 EU countries, including non-euro countries such as Britain and Poland, agreed to create a single supervisor for the region's banks.

It was a key component of what many hope will eventually become a full-fledged banking union -- a single rule book for all banks and coordinated plans for helping lenders in trouble. Crucially, the single supervisor paves the way for Europe's bailout fund to give money directly to struggling banks, without dragging governments into the mess.

"The banking union will be built on this first fundamental step today," said Michel Barnier, the EU commissioner responsible for the monitoring of financial markets.

Providing it is approved by the European Parliament early next year, the European Central Bank will take on the single supervisory role. The ECB will have direct oversight for the largest and most significant banks in the eurozone and any other country in the EU that wants to opt in. It will also direct national authorities in supervising smaller lenders.

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