Having taken the first step towards a banking union, EU leaders put off the more difficult issues of resolving problem banks and who exactly would pay for them.
Ambitious plans for completing an economic and monetary union were also shelved, which was not unexpected as German elections loom next September.
They were also anxious not to make changes that could require changes to the EU treaties, although Taoiseach Enda Kenny said: “As you focus on the consequences of banking, Europe, and greater cohesion in the time ahead, there may be consideration for future treaty change and if so, you deal with it then.”
Details on whether Ireland will get a deal in cutting its national debt should become clearer by mid-March, when finance ministers will have decided what is a legacy asset and if it can be directly financed by the €500bn rescue fund, the ESM.
While Mario Draghi, the ECB president, has made it clear he will call the shots on banks in the future, just who will be responsible for rescuing or winding up banks and how these will be paid for is still unclear.
The European Commission has been asked to make proposals for a single resolution mechanism for member states participating in the new single supervisory mechanism, with a view to adopting it before Jun 2014.
“It should safeguard financial stability and ensure an effective framework for resolving financial institutions while protecting taxpayers in the context of banking crises,” the summit conclusions state.
It should be based on contributions by the financial sector and include effective backstop arrangements. “This backstop should be fiscally neutral over the medium term, by ensuring that public assistance is recouped by means of ex post levies on the financial industry,” the conclusions state.
This leaves the possibility open that the ESM will have to lend the money, or that taxpayers may provide the funding, claiming it back from the financial industry.
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