EU leaders seal bank plan to beat crisis

By the close of a two-day summit, France and Germany had patched up differences over how to beat the debt crisis, although the new watchdog for 6,000 banks will come too late to re-float Spanish lenders via a dedicated rescue fund.

However, new divisions are looming on the issue of recapitalising ailing Spanish banks as Chancellor Angela Merkel told reporters in Brussels Friday that it would not be retroactive -- opposite to the position taken by Paris.

Recapitalisation, Merkel said, "will only be possible for the future."

After the summit, leaders also hailed a 120-billion-euro ($155-billion) package of measures to try to kickstart a climb out of recession as social and political unrest hits Greece and Spain.

Ideas included using proceeds from a proposed tax on financial transactions to tackle youth unemployment currently running in these two countries at more than 50 percent.

Difficult decisions remain to be taken in two more summits before Christmas, as Britain's David Cameron threatened to veto the European Union's budget for the rest of the decade and snub the Nobel Peace Prize-giving ceremony in Oslo in December.

Conflicts in Syria and Mali, as well as Iran's disputed nuclear programme also figured among their chief concerns.

But with market pressures considerably eased since the summer, eurozone and EU leaders found some common ground with the fresh commitment to bird's eye bank supervision led by the European Central Bank.

This is supposed to anchor a re-designed economic and monetary union that leaders are beginning to believe -- after three years in full crisis mode -- can make the euro more attractive to EU states still outside the currency bloc.

After an 11-hour session into the wee hours to reach the bank supervision deal, Merkel said it was not about "trying to bargain for extra days or months," but rather ensuring a "solid legal framework" could be found by year-end.

"We need democratic legitimacy," she said, plus further clarity on dealing with eurozone banks in non-euro territories, especially the global financial centre of London, and vice-versa.

Italian Prime Minister Mario Monti said a Merkel plan to create a "super-commissioner" with powers to intervene directly in states' tax-and-spending plans flopped.

French President Francois Hollande said the summit outcome was "a good deal" but he resisted a German push to change the EU treaty next year after a December summit that is meant to nail down "concrete" moves to tighten centralisation of economic policy.

Hollande said he didn't see the "utility of adding new mechanisms."

He did, however, suggest that the fruits of a financial transactions tax (FTT) that a group of EU states want to start next year be "dedicated to youth training" to get a lost generation of European youths into employment.

On the issue of helping Spanish banks via the new European Stability Mechanism (ESM) fund, French Finance Minister Pierre Moscovici said: "We have pleaded for retroactivity."

A French government source held out the possibility of a compromise deal between the French position and that held by Germany, as well as the Netherlands and Finland, opposed to retroactivity.

Hollande also called for a "quick decision" on the resumption of Greece's long-paused bailout.

Recent EU-wide praise for Greece has suggested a more sympathetic hearing for a two-year extension Athens seeks on its commitments, though leaders urged the coalition government to stick to the goals of its debt bailout.

"The country's reserves are only sufficient until November 16," Greek Prime Minister Antonis Samaras said, while adding that "the climate has changed" among partners in Brussels.

Hollande, who will shortly follow Merkel in visiting Greece himself, also warned against "adding austerity to austerity" by imposing harsh conditions on Spain if it were to request a full sovereign European bailout.

In a clear sign that social unrest is far from over, Spain's main unions called a general strike for November 14.