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EU delays euro fix after deal on Greece, banks

Richard Carter
British Prime Minister David Cameron (L) and German Chancellor Angela Merkel at EU Headquarters in Brussels on December 14, 2012. Europe's leaders on Friday pushed back radical moves to fix faults in the euro at the final summit of a crisis-hit 2012 that saw much-trumpeted deals to save Greece and monitor big banks.

Europe's leaders on Friday pushed back radical moves to fix faults in the euro at the final summit of a crisis-hit 2012 that saw much-trumpeted deals to save Greece and monitor big banks.

At the close of a year that saw Greece near bankruptcy and a eurozone exit, with the crisis spreading to Spain and Italy, leaders were keen to look forward after releasing funds for Athens and agreeing to keep a close eye on big banks.

And on Syria, EU leaders also tasked their foreign ministers to look at "all options to support and help the opposition" while British Prime Minister David Cameron said that "inaction and indifference are not options."

Yet Europe had started the year with many "seriously questioning whether the euro and indeed European integration would survive," recalled European Commission President Jose Manuel Barroso.

"I think those commentators and those analysts have been shown to be totally wrong," he insisted.

Barroso hailed what he termed "extremely important" deals on banking supervision and releasing loans to Greece and concluded: "I am really confident that we are going to overcome the difficulties."

For his part, French President Francois Hollande said that "good work was completed throughout 2012 that enables us to be confident for 2013."

"The euro is out of this period in which there were questions over its future, its fate," Hollande said.

The leaders of two of the countries hardest hit by the crisis, Spain and Italy, also saw a sunnier outlook next year.

"We can look ahead to 2013 with serenity," said Italian Prime Minister Mario Monti.

Spain's prime minister Mariano Rajoy said: "Decisions have been taken and steps taken that appeared impossible at the beginning of the year."

But the head of Europe's top economy and effective paymaster, German Chancellor Angela Merkel, was more "cautious."

"Yes, a few things have been achieved, but there are still difficult times ahead of us," she told reporters, urging other eurozone countries not to let up in their reform efforts.

After a buy-back scheme that wiped tens of billions of euros off Greece's debt, ministers on Thursday unlocked a much-needed injection of cash that could begin flowing as early as next week.

The accord prompted Greek Prime Minister Antonis Samaras to declare that "Grexit", the idea that Greece would be forced out of the 17-nation bloc, was "dead".

Leaders also hailed a "breakthrough" in banking supervision after placing the biggest eurozone banks under the aegis of the European Central Bank, paving the way for Europe's bailout pot to recapitalise struggling lenders directly.

But as market pressures have waned, leaders appeared to feel less urgency over proposed moves to plug holes in the construction of the eurozone that the crisis has laid bare.

Ahead of the meeting, Van Rompuy had drawn up ambitious proposals for the euro's future including the possibility of a eurozone budget and financial support in return for countries that commit in writing to reforms.

However, the summit's final declaration contained few of these ideas, as leaders invited Van Rompuy to pen another report on closer economic coordination in June 2013.

Further steps towards a fully fledged banking union, including guaranteeing deposits on a euro-wide level and a mechanism for winding up insolvent banks should be proposed "in the course of 2013" and implemented the year after.

"The EU and the eurozone have ended the year with the typical mixture of delivering the bare minimum without overachieving a single tiny bit," complained Carsten Brzeski, an analyst at ING bank in Brussels.

"The famous roadmap towards further integration of the eurozone has been delayed once again," he noted.

Analysts at Barclays Capital were also downbeat.

In a research note headlined "EU summit: even more disappointing than we anticipated", they complained the Van Rompuy proposals were "significantly watered down."

Hovering in the background at the summit were fears that the reform process in Italy could stall -- with dire consequences for the eurozone -- after Monti said he would soon step down.

Leaders closed ranks around Monti, however, with Merkel saying his government had "done a great deal of helpful work for the confidence that Italy is now enjoying again."

Predecessor Silvio Berlusconi meanwhile appeared to row back on a pledge to run for office, telling Belgium television that he still had "so much to do" outside politics.