BRUSSELS (AP) -- Germany and France are divided over of the powers a new European banking supervisor should have to better deal with financial crises, leading European Union finance ministers to end a meeting Tuesday without agreement on the matter.
The 27 finance ministers are trying to agree on the setup of the new supervisory body, which will be headed by the European Central Bank and will hold wide-ranging authority over banks. Unable to bridge their differences on Tuesday, they will try again in a special meeting set for Dec. 12, a day before EU heads of state and government are scheduled to gather in Brussels.
Germany and France, the continent's two largest economic powers, disagree on how many banks the ECB should be allowed to oversee, when it should start, and what its final powers should be.
German Finance Minister Wolfgang Schaeuble said in public deliberations that `'it would be very difficult to get approval by the German parliament if (the deal) would leave the supervision for all the German banks to European banking supervision.”
`'Nobody believes that it would work,” Schaeuble said. Germany has hundreds of local banks which operate differently from large multinationals like Deutsche Bank. Schaeuble has been pushing for the new supervisor to oversee only the few dozen largest banks in Europe.
On top of that, he said the ECB had to remain at arm's length from any supervisory decision-making it takes on to protect its independence. The ECB sets monetary policy for the 17 EU countries that use the euro and is committed to remain independent of political pressure. Germany fear the ECB's independence may be lost if it has to negotiate the bailout of a bank in one of the member states.
`'The last decision cannot be left to the governing Council of the ECB,” Schaeuble said of bank bailouts.
In contrast, France's Finance Minister Pierre Moscovici came out strongly for an agreement `'that covers all banks, and that is under the final control of the ECB.”
He advocates supervision of all 6,000 institutions that have a banking license in the EU.
`'In the end it must be the ECB that has the responsibility on the whole. Otherwise, there is no real system of banking supervision,” he said.
In addition, some countries, including France, want a political framework for the supervisor in place by the end of this year. Others, including Germany, argue that speed should not trump quality and thoroughness.
Belgian Finance Minister Steven Vanackere said it was important to get the supervisor in place soon.
“As with all musical masterpieces, the tempo of our decision is part of the quality,” Vanackere said.
The banking sector has been seen as a prime cause of Europe's three-year crisis and agreement to fix it as an essential part to avoid a recurrence.
Not only have banks taken on bad investments, but national supervisors have often been reluctant to impose restructuring plans on them, particularly since many banks operate across borders. A common European supervisor, proponents say, would bypass the national politics and do what is needed to keep the continent's financial sector healthy.
The supervisor is a key part of a broader banking union the EU is working on. The 10 EU nations not using the euro want to be included in a banking union but also worry it could stifle their financial sectors if too harsh.
European leaders have agreed, in theory, to cede significant amounts of sovereignty to fix the banking issue and runaway spending of several member states.
As so often before, the practical implementation has proved difficult. The crisis has highlighted the many divisions within the EU, critics say, at a time when a strong and united vision was needed.
Closer banking and monetary cooperation will be a key topic at next week's summit meeting of EU government leaders, and a deepening rift between traditional allies France and Germany would complicate progress.
Don Melvin contributed to this article.