World Bulletin/News Desk
German Chancellor Angela Merkel warned on Monday against rushing to create a new pan-European bank supervisor under the roof of the ECB, saying it was more important to put a credible watchdog in place than to meet Europe's self-imposed January deadline.
Speaking at her traditional summer news conference in Berlin, delayed this year to allow the Constitutional Court to rule first on Europe's new rescue fund, Merkel also voiced support for European Central Bank (ECB) President Mario Draghi's decision to buy the bonds of stricken euro states.
Draghi's move, the Karlsruhe court ruling in favour of the bailout fund and a strong showing by pro-euro parties in a Dutch election last week have combined to cheer markets, pushing the euro to a four-month peak against the dollar.
Merkel appeared calm and confident during the hour-and-a-half briefing, at which German and international journalists lobbed questions at her about the euro crisis, her re-election hopes, Muslim protests, Iran, Syria and energy policy.
The 58-year-old German leader offered a robust defence of her Finance Minister Wolfgang Schaeuble, who at a meeting with his European counterparts in Cyprus over the weekend played down expectations that a new bank supervisory body would be up and running by the start of 2013.
"It is not a matter of coming up with something as soon as possible which will also end up not working, but of winning back credibility," Merkel told reporters.
She said it was "pretty unlikely" that the body would be operational by January 1, saying it was better to go "a bit slower" to ensure a regulator of high quality.
Merkel also dismissed the notion that struggling banks might be able to tap the euro zone's new rescue fund, the European Stability Mechanism (ESM), for direct aid before the new supervisor was up and running.
The creation of a pan-European banks watchdog needs to be approved by the EU's 27 member states. It aims to break the link between struggling banks and indebted governments, an interdependence that has exacerbated the three-year-old euro crisis, hitting Spain and Ireland particularly hard.
Although Germany was a driving force behind the idea at an EU summit last June, it has warned since then about overburdening the ECB with new tasks too soon.
For example, Berlin is resisting plans by the European Commission to give the ECB responsibility for monitoring all 6,000 banks in the bloc, in part because it wants to retain primary oversight for German regional and cooperative banks.
Merkel also touched on criticisms of Draghi's bond-buying programme by Bundesbank President Jens Weidmann, saying her former economic adviser had a right to express his opinions on crisis strategy.
Finance Minister Schaeuble, in what was seen as a direct dig at Weidmann, told a German newspaper at the weekend that the public debate over the bond-buying plan risked damaging confidence in the ECB.
Merkel has had to walk a fine line, simultaneously defending Weidmann, whose criticisms are shared by many Germans, and supporting Draghi's policies, which have calmed markets and boosted confidence that the crisis can be resolved.
She told the news conference on Monday that she had no reason to believe the ECB was violating its mandate by buying bonds, a step Weidmann has said breaks a taboo on state financing.
"If the ECB determines that monetary transmission has become difficult, then it must take measures to ensure price stability - it is not up to us to set it limits," Merkel said.
"The German government has made clear it believes that monetary stability issues justify the ECB's latest decisions."
Merkel dismissed suggestions from the leader of her Bavarian sister party, the Christian Social Union (CSU), that a 190 billion euro cap on Germany's contribution to the ESM should also apply to its share of ECB bond buys. The chancellor said there was no link between the two.
Volatility eased as traders focused on the world economy and corporate earnings after a week dominated by the dramatic spike in tensions over North Korea, which triggered a global sell-off before prices bounced back Monday.
Investors greeted the more conciliatory tone after US stocks dropped three days in a row last week on President Donald Trump's vow of "fire and fury" if North Korea continued to pursue its nuclear weapons and ballistic missile programs.
The ultra-conservative kingdom has moved to diversify its traditionally oil-dependent economy following a sharp fall in crude prices.
In its monthly report on the global oil market, the International Energy Agency said, however, that it believes the supply glut is easing, partly because demand is growing faster.
US stocks have been in retreat since President Donald Trump Tuesday issued a fiery warning to North Korea to halt its nuclear program.
The move by one of Japan's best-known firms greatly reduces the chance of an embarrassing delisting from the Tokyo Stock Exchange (TSE).
London's benchmark FTSE 100 index weakened by 0.5 percent to 7,503.39 points.
The approval by the European Commission comes just over two months after the European Central Bank -- which took on the role of the eurozone's banking supervisor in 2014 -- allowed the sale to go ahead for a symbolic fee of one euro.
BP, Chevron, ExxonMobil, Shell and Total have all published results in recent days, showing they pocketed $23 billion in net profit in the first half fo the year.
Higher cereal, sugar and dairy prices pushed food price index by 10.2 percent annually in July
HSBC was also a big riser, gaining three percent at £7.65 ($10, 8.5 euros) in late morning trade after the British banking giant announced a share buyback plan alongside a rise in first-half profits.
Both main crude contracts made strong gains, with WTI testing $50 a barrel for the first time since late May and Brent heading towards $53, while mining giants BHP Billiton and Rio Tinto saw their share price rise as commodities strengthened.