Franco-German bank spat overshadows EU summit

(BRUSSELS) - A spat between European powerhouses Germany and France over the best way to end the three-year debt crisis threatened to mar an EU summit Thursday, as anti-austerity protests claimed one life in Greece.

Paris was pushing for a rapid accord on an EU banking union, tasking the European Central Bank to supervise financial institutions and allowing banks in difficulty to receive EU bailouts. But Berlin insisted there was no rush.

Arriving at the summit after a tete-a-tete with German Chancellor Angela Merkel, French President Francois Hollande stressed the need to "finally put in place the banking union in the required timeframe."

Merkel for her part acknowledged the need to move "quickly" but also underlined the need for "thoroughness."

"This will not be a summit at which we will ... take decisions, but we will prepare the decisions for December so we have to set the right course," she said.

A German diplomatic source added that the supervisor would not be in force in January. "There are still too many complex questions to solve," said the source, who requested anonymity.

Hollande and Merkel also appeared to clash over proposals from Berlin to beef up the power of the European Commission to supervise individual countries' budgets, handing the EU executive veto power if required.

But Hollande has said bluntly: "The subject of the (EU summit) is not budgetary union, it is banking union."

"So, the only decision that we must take, or rather confirm, is the setting up of the banking union by the end of the year, and notably the first step, which is banking supervision," he said.

He also noted that Merkel "had her own deadlines", referring openly to the German general election that must be held in September or October next year.

Unlike the majority of EU gatherings over the past three years, the summit took place in an atmosphere of relative calm on the financial markets, with Spanish borrowing costs plunging recently on hopes it would soon request aid.

European stock markets closed higher for a fourth consecutive day as investors expressed greater confidence that the eurozone would eventually come to terms with the crisis that has pitched many in the bloc into recession.

But the crises in Spain and Greece continued to bubble away in the background and burst into violence in Athens Thursday, as Greek riot police fired tear gas at protesters on the sidelines of a large anti-austerity rally.

A 65-year-old protester collapsed and died from a heart attack but it was not immediately clear if his death was linked to the sporadic bursts of tear gas.

Authorities were aiming to disperse demonstrators as a general strike, the fourth this year, brought transport across the country to a virtual halt. Five people including two police, were hurt in clashes.

The Greek strike highlighted popular outrage at the tough austerity measures Athens agreed to implement in return for massive bailouts.

Meanwhile, opening the summit, EU President Herman Van Rompuy invited all 27 member states to attend the awarding of the Nobel Peace Prize in Oslo, adding that the hardships the bloc now faced were nothing compared to the post-war era.

"We are facing serious difficulties today but we can draw confidence by remembering that the obstacles the builders of Europe had to overcome were frankly more daunting," Van Rompuy said.

European Parliament President Martin Schulz said only he and the presidents of the two other main institutions -- the European Commission and the European Council -- would actually receive the Nobel award.

Officials played down expectations ahead of the summit, saying it would largely be a stock-taking exercise before a critical December summit that is to draft a plan to strengthen economic and monetary union.

European Council