Merkel praises EU bank deal, urges payment to Athens

(BERLIN) - German Chancellor Angela Merkel on Thursday praised a new EU accord to create a supervisor to oversee banks across the eurozone and urged the release of urgently needed funds for Greece.

Addressing lawmakers in the Bundestag lower house of parliament, she said the deal clinched by finance ministers earlier in Brussels just hours before an EU summit was of inestimable value and had met German concerns.

"It cannot be valued highly enough that eurozone finance ministers agreed overnight on a legal framework and the outlines of a common supervisory mechanism for banks," she said.

She thanked German Finance Minister Wolfgang Schaeuble, saying that Berlin's "core demands" had been met in the agreement, noting a "clear separation" between the European Central Bank's (ECB) responsibility for monetary policy and oversight.

"We will limit the oversight to systemically important banks," she added.

The complex bank supervision deal is a key step towards a banking union which EU leaders hope will ring-fence banks in trouble to prevent future crises.

It will allow eurozone banks to be recapitalised directly, rather than through governments, so as to avoid adding to their growing debt burden.

The ECB will manage the eurozone system in tandem with the London-based European Banking Authority, which covers all 27 EU states, and national supervisors.

From March 2014, banks with assets worth more than 30 billion euros ($39 billion) or equal to 20 percent of a state's economic output will come under the ECB remit.

The ECB will also have the right to intervene in cases involving smaller banks but it is expected that national supervisors will have the main responsibility in this category.

Turning to Greece, Merkel said the Greek government's reform efforts "deserved our support" and noted the German parliamentary budget committee had given the green light Wednesday for the next aid payments to Athens.

"Germany has therefore cleared the way and I hope the Eurogroup can decide today on this payment," she said adding: "anyone dealing with Greece's circumstances knows that it is urgently necessary".

She added: "The implemented buy-back programme of state bonds has provided an important contribution to the improvement of its capacity to bear debt."

On Wednesday, Athens announced it had attracted offers worth 31.9 billion euros under the debt buy-back scheme.

The buy-back aims to cut Greece's debt by about 20 billion euros and is vital to unblock pending loans from the European Union and International Monetary Fund, which were frozen earlier this year owing to reform delays.

Merkel listed several achievements in battling the crisis which has brought the eurozone to its knees over the last three years but said there was still a way to go to be able to put its troubles firmly behind it.

"We have come quite far on the path towards a stable and strong Europe but we must not let ourselves settle for what's already been achieved," she warned.

"There still remains very much to do to win back the confidence in the European Union as a whole," she added.

And she said that closer economic coordination in the eurozone was needed and suggested that EU meets in the first half of 2013 examine how to achieve this goal in a concrete and sustainable way.

She said if EU leaders meeting later in Brussels succeeded in drawing up a roadmap on how to reach this goal at their talks Thursday and Friday it would be a "good result".