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Sharp divisions over banking union before EU summit EU summit: Angela Merkel calls for national budget veto
(about 2 hours later)
  
EU states are sharply divided over plans for banking union as their leaders gather in Brussels for a two-day summit. The German chancellor has called for the EU to be given the power to veto member-states' budgets, hours before leaders meet in Brussels for a summit.
The aim is to agree first on joint banking supervision, with the European Central Bank playing the lead role. Angela Merkel said the economics commissioner should be given clear rights to intervene when national budgets violated the bloc's rules.
But the UK - the EU's main financial centre - wants safeguards to protect the powers of the Bank of England. The idea is likely to be strongly opposed by members concerned about any increase in the EU Commission's powers.
The summit is expected to focus on plans for a banking union.
The aim is to agree first on joint banking supervision, with the European Central Bank playing the lead role, but the UK - the EU's main financial centre - wants safeguards to protect the powers of the Bank of England.
It and the other nine non-euro states are also concerned about voting rights in the proposed banking union.It and the other nine non-euro states are also concerned about voting rights in the proposed banking union.
German Chancellor Angela Merkel has called for the EU to be given clear rights to intervene when member states' national budgets violate the bloc's rules. Further complicating the issue, France and Germany differ over the timetable for such a union, with Berlin advocating caution.
The EU's economics commissioner should have the authority to declare a budget "invalid", she told the German parliament in Berlin on Thursday morning. Meanwhile Greece, the eurozone state worst hit by the debt crisis, is in the grip of a new general strike.
Her government has proposed a full fiscal union with control at European level of tax and spending.
Meanwhile in Greece, the eurozone state worst hit by the debt crisis, a new general strike is getting under way.
'Quality before speed''Quality before speed'
The summit is taking place amid calmer European stock markets than at previous meetings and with less concern over the debt crises in Spain and Greece, analysts say. Addressing the German parliament in Berlin on Thursday morning, Mrs Merkel said the EU should have "real rights to intervene in national budgets" that breach the limits of the EU's growth and stability pact.
The EU's economics commissioner, she suggested, should have the authority to send a budget back to a national parliament.
"Unfortunately", Mrs Merkel said, some EU member states were not ready for such a step.
"I am astonished that, no sooner does someone make a progressive proposal... the cry immediately comes that this won't work, Germany is isolated, we can't do it," she added.
"This is not how we build a credible Europe."
Her government has proposed a full fiscal union with control at European level of tax and spending.
The summit is taking place amid calmer European stock markets than at previous meetings and with less immediate concern over the debt crises in Spain and Greece, analysts say.
However, the banking union proposal has brought urgency to the talks, with the EU's executive Commission, the ECB and several states including Spain and France wanting its legal basis to be in place by January.However, the banking union proposal has brought urgency to the talks, with the EU's executive Commission, the ECB and several states including Spain and France wanting its legal basis to be in place by January.
Germany, while advocating greater fiscal control, is urging caution, with Mrs Merkel repeatedly stressing that "quality must trump speed". In href="http://www.guardian.co.uk/world/2012/oct/17/francois-hollande-interview-eu-france" >an interview for the UK's Guardian newspaper, French President Francois Hollande said there was "no time to lose" in setting up a banking union.
However, Mrs Merkel has repeatedly stressed that "quality must trump speed".
A top German official, who spoke to the Associated Press news agency on condition of anonymity, said many "legal, technical and political details" for a supervisory authority had still to be hammered out.A top German official, who spoke to the Associated Press news agency on condition of anonymity, said many "legal, technical and political details" for a supervisory authority had still to be hammered out.
On Wednesday, German Finance Minister Wolfgang Schaeuble said eurozone countries "need to tackle problems themselves", adding that the eurozone bailout fund was there to help countries do just that.
But he reiterated his view that further steps towards political integration would strengthen the bloc.
While the 17 eurozone states largely support the proposal for a banking union, the remaining 10 are uneasy that their banks might face new regulation without their say-so.While the 17 eurozone states largely support the proposal for a banking union, the remaining 10 are uneasy that their banks might face new regulation without their say-so.
Bailout approach?
The BBC's Gavin Hewitt says little will be agreed at the summit.The BBC's Gavin Hewitt says little will be agreed at the summit.
It is the fourth time that the leaders of the EU's 27 nations have met this year.It is the fourth time that the leaders of the EU's 27 nations have met this year.
While not originally on the agenda, there is speculation Spain may ask for a limited bailout in Brussels.
One diplomatic source told AFP news agency that Spanish Prime Minister Mariano Rajoy might use the summit to "make explicit the conditions that would be imposed in exchange for aid" over and above those agreed in June to help Spain's banks.
Other business expected to come up at the summit includes relations with China and the situation in Syria, Iran and Mali.Other business expected to come up at the summit includes relations with China and the situation in Syria, Iran and Mali.