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Single bank supervisor agreed on for eurozone

BRUSSELS - European leaders reached agreement Thursday on creating a single supervisory body for banks in the countries that use the euro that will be up and running sometime next year, German diplomats said.

BRUSSELS - European leaders reached agreement Thursday on creating a single supervisory body for banks in the countries that use the euro that will be up and running sometime next year, German diplomats said.

The deal reached at a summit of European leaders here represents a compromise between the Germans and the French, who had been tussling over how best to shore up the region's stricken banking system, one of the main causes of Europe's debt crisis.

In Ireland's case, the government's attempts to rescue failing banks forced it into a bailout. Some fear that Spain could face that fate, too.

France has been pushing to get all 6,000 banks in the 17 countries that use the euro under the supervision of one European body by the end of this year.

Leaders agreed in June that, once a supervisor is in place, struggling financial institutions would be able to tap Europe's emergency bailout fund, the European Stability Mechanism, directly. At the moment, money to help out banks has to go through a country's government, placing more strain on state finances.

But German Chancellor Angela Merkel, wary of using taxpayers' money to prop up other countries' banks, tried to put the brakes on the plan, insisting that creating the supervisor should be done slowly and that "quality must come before speed".

"There are a lot of very complicated legal questions, and I am not making the issue more difficult than it actually is," she told the German Bundestag on Thursday morning.

By evening, however, German diplomats said agreement had been reached. The legal framework for a supervisor would be completed this year. The plan will be put into place sometime next year, the two officials said. They would speak only on condition of anonymity before an official announcement.

However, there are still more issues under debate at the summit, which runs into Friday. Merkel is pushing a proposal for the European Union's monetary affairs commissioner to become an enforcer of the bloc's budget rules, with the power to refuse member countries' spending and tax plans and send them back for changes.

Germany hopes that having a "budget czar" - a move that's been bandied about for months - will help keep governments from overspending and needing expensive bailouts. But some countries, such as France, are wary of handing control over their finances to unelected officials in a foreign capital.

On arrival Thursday, President Francois Hollande of France - increasingly the counterpoint to Germany's weight in the EU - brushed off the suggestion as simply not on the table at this summit.