After a marathon 10-hour meeting in Brussels which ended early this morning European leaders agreed to draw up legislation giving the European Central Bank powers over any bank in trouble in the eurozone.
At first sight the agreement seemed to favour the French, who had pushed for the legislation to be in place by 2013 and for it to cover all 6,000 eurozone banks.
French President Francois Hollande praised the timetable to have a framework by the end of this year leading to full legislation by January 2103. This will cover the 6,000 banks.
But German Chancellor Angela Merkel, who had said economic stability rather than banking regulation was the first priority and held out for local regulation of local banks which posed no systemic risk, appeared to have won on the latter.
She also said it would be months rather than weeks before the ECB could move directly to bail out banks in countries such as Spain.
The UK is also under threat from the agreement because the ten countries outside the 17-member eurozone would always have only a minority vote on the new banking scheme.
This could mean that legislation which would affect the City of London could not be vetoed by the Treasury.
