EU leaders agree on banking union deal

European Union leaders have agreed to create a single supervisor for banks in countries that use the euro, and said it would "probably"' become operational sometime next year.

The deal, reached at a summit of EU leaders in Brussels on Friday, represents a shaky compromise between the Germans and French, who had been tussling over how to shore up the eurozone's banking system.

France has been pushing to get all 6,000 banks in the 17 countries under the supervision of one European body by the end of this year. Leaders agreed in June that, once a supervisor is in place, struggling financial institutions would be able to tap Europe's emergency bailout fund, the European Stability Mechanism, directly.

At the moment, money to help banks has to go through the country's government - placing more strain on state finances.

In Ireland's case, the government's attempts to rescue failing banks forced it into a bailout. Some fear Spain could face that fate, too.

But Germany's Chancellor Angela Merkel, wary of using taxpayers' money to prop up other countries' banks, tried to stop the plan, insisting that creating the supervisor should be done slowly and that "quality must come before speed".

The agreement includes all 6,000 banks, as France had wanted. But there is no firm deadline for the single supervisor to be up and running - other than to say that the "objective'" is to finish the legal framework by January 1, and that work on its operational implementation "will take place during the course of 2013".

Herman Van Rompuy, European Council president,  said the single supervisor would "probably" be up and running next year.

"It is not because you vote on a law that you have the whole logistic framework in place the day after," Van Rompuy said.

Despite the lack of a deadline, Francois Hollande, French President hailed the agreement. "The worst is over,'' he said, referring to the crisis that the European Union experienced.

However, there are still more issues under debate at the summit, which runs until Friday.

Merkel is pushing a proposal for the European Union's monetary affairs commissioner to become an enforcer of the bloc's budget rules - including the power to refuse member countries' proposed spending and tax plans and send them back for changes.

Germany hopes that having a "budget czar" - a move that's been debated about for months - will help keep Europe from repeating past mistakes by stopping governments from overspending and needing expensive bailouts.

But some countries, such as France, are wary of handing control over their finances to unelected officials in a foreign capital.