EU scores hat-trick with Greek, bank deals, Nobel

BRUSSELS It's looking like being one of those very rare weeks of good news for Europe.

After months of bitter debate, European Union countries finally reached two crucial agreements Thursday: They found a compromise to create a single supervisor for their banks - a major step toward lessening the damage struggling lenders can inflict on government finances - and agreed to give Greece desperately needed bailout funds.

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As if that weren't enough, earlier on in the week, European leaders also accepted the Nobel Peace Prize - an award that was in equal measure recognition of the peace the union had forged on the once war-torn continent and incentive to solve its intractable financial and political crises.

So upbeat was the mood in Brussels that European Council President Herman Van Rompuy even dared to say the end of the crisis might be at hand.

"The worst is now behind us," he told European leaders gathered for a summit Thursday to discuss how to build a closer union.

"But of course much still needs to be done," he added.

The measures, approved by European finance ministers, ended months of haggling over ways to deal with the three-year financial crisis caused by too much government debt.

First, finance ministers from the 27 EU countries negotiated through the night to agree to give the European Central Bank oversight of their banks. That is a key component of what many hope will eventually become a full-fledged banking union - a single rulebook for all banks and coordinated plans for helping lenders in trouble.

Crucially, the single supervisor paves the way for Europe's bailout fund to give money directly to struggling banks, without dragging governments into the mess.

Then, the 17 EU countries that use the euro waved through a total of $64 billion in bailout funds for Greece, about $45 billion of which will be disbursed in the coming days.

The funds are vital because Greece needs the money to stay afloat and avoid a calamitous default. But the deal is also important for the other 16 countries because disagreement over how to handle Greece had raised fears that a default would bring down the entire currency union.

"The door appears to have been shut on this for now at least," said Craig Erlam, a market analyst with Alpari.

Dealing with the connection between banks and government debt - a toxic loop that has forced several countries to ask for bailouts after they tried to rescue their banks - also addresses a major cause of the region's financial crisis.

"The crisis came by way of the banks and now a tool is in place so that nothing will be like it was before," declared French President Francois Hollande on his way into Thursday's summit.

However, serious challenges remain: The economy across the eurozone is in recession; unemployment is rising; and in recent days, industrial production and retail sales have fallen further than forecast.

And while leaders have reached a couple of significant agreements this week, there are still some tough problems to crack. They still have to agree how to wind down bankrupt banks and save others that are struggling. And they also have to find a way to match the powers they're planning to give bureaucrats at the EU with democratic accountability.

In its attempts to strengthen the Europe against future financial crises, the EU has made significant promises about the kinds of powers it's ready to hand over to the central bureaucracy. On Thursday, leaders were discussing having their countries enter into individual contracts with the EU to ensure they keep their commitments to cut excessive spending and adopt important reforms to make their economies more competitive.

They were also talking about creating a budget for the eurozone that could help prop up countries that are struggling under the weight of reforms - as Spain and Greece are now.

The problem leaders face is that they are concentrating so much power in Brussels that they need to make institutions that are now just bureaucracies accountable to voters. Some countries that don't use the euro are also beginning to worry about being marginalized in the EU as the countries that do use the currency build up their institutions.

That concern was a major obstacle to the agreement on the single supervisor Thursday. Banking rules are written by the European Banking Authority for all 27 EU nations, but the single supervisor will only cover banks in the eurozone and other countries that want to sign up. Those that decide to stay out of the system - like Britain and Sweden - were nervous that their voices would be drowned out by power of the ECB-led bloc.

Ministers reached a compromise that ensures that measures can't pass in the EBA without at least some support from countries outside of the ECB's supervision.

Amid the week's success, Olli Rehn, EU commissioner for monetary affairs, dared to declare victory over doomsayers.

"They have been proven wrong by the eurozone, which has made good on its word," he said.