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Merkel opposes retroactive bank recapitalization in union

BRUSSELS -- German Chancellor Angela Merkel raised new hurdles on Friday to using the eurozone's rescue fund to inject capital directly into ailing banks from next year, dashing Spain's hopes of soon removing the cost from its strained national debt.

Merkel's move limited the impact of a key decision by European Union leaders struggling to overcome a 3-year-old debt crisis in the 17-nation currency area — an overnight agreement to establish a single banking supervisor from next year.

Spanish Prime Minister Mariano Rajoy, who received a eurozone pledge in June of up to 100 billion euros to recapitalize a banking sector hit by a burst real estate bubble, said he had still had not decided whether to request a sovereign bailout.

EU leaders agreed at a two-day summit that the European Central Bank will take responsibility for overseeing eurozone banks from next year, but Merkel said it would take time for the new supervisor to be fully effective.



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