FRANKFURT (MNI) – The situations in Spain and Greece and the
prospects of a broader Eurozone recession took a back seat to
discussions about how to move forward with banking union at the EU
leaders summit in Brussels Thursday, French President Francois Hollande
said.

While the prospect of direct bank recapitalization through the ESM
was clearly a topic, as leaders discussed how and when to make a single
banking supervisor operational, Hollande said Spain’s own case did not
come up for discussion.

“There was no debate about Spain,” Hollande told reporters after
the summit broke early Friday morning. “Spain made no demands, and
nothing was demanded of Spain.”

Hollande’s comments suggest he and other EU leaders feel less
pressure at the moment to retroactively recapitalize Spain’s banks via
the ESM rescue fund. The French president said Spain understood the
order – direct bank recapitalization would only become a possibility
once a single supervisory mechanism becomes operational, likely some
time in 2013.

Hollande noted the Spanish government already has received aid
through the EFSF rescue fund to help recapitalize its banks, but said
Spain offered no plans and made no request for any additional aid during
Thursday’s summit.

“There was no desire at all expressed by Spain in the debate this
evening to obtain a recapitalization of its banks though any other
mechanism than what we have put in place,” Hollande said.

On Greece, Hollande said the discussions were “short,” with all
leaders agreeing they saw progress and a desire on the side of Greece’s
government to meet its obligations. He acknowledged that some details
remained to be worked out between the troika and Greek government,
before the Eurogroup would consider releasing the next tranche of aid to
Greece, worth E31.5 billion.

Both Hollande and German Chancellor Angela Merkel stressed that
Greece would be able to remain in the euro if it fulfilled its
obligations.

“We expect that Greece will meet its obligations, and that meeting
its obligations will also ensure that Greece can remain in the Eurozone
– so a clear connection between conditions on the one hand and their
remaining in the Eurozone,” Merkel told reporters.

Hollande said the summit’s focus was entirely on the topic of
banking supervision and that growth and recession were not in and of
themselves a topic for the evening.

But Hollande did say some countries had raised the social problems
being caused by austerity in peripheral countries, and that many other
states had intervened on their behalf, broaching the risk of recession
and political and social unrest.

— Frankfurt bureau: +49 69 720 142; email: ccermak@mni-news.com

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