Even as late as last week, people close to the negotiations on the fledgling banking union thought a viable compromise was still way off. The differences between France and Germany seemed almost insurmountable, the Brits were kicking up a fuss as usual and the legal questions appeared fiendishly complex.
That a deal on the legal framework came in time for this week's European Union summit, therefore, is a notably pleasant surprise. Against the odds, rationality and common sense prevailed. After yet another marathon meeting, red-eyed finance ministers met the ambitious deadline set last June.
Up to a point, the agreement is an end in itself. It shows that EU governments are willing and able to act. Leaders may have had to peer into the abyss, but in the eleventh hour it seems they can stop bickering and get real.
Surprisingly, the outcome also managed to please the U.K., something that rarely happens in Europe these days. Britain discovered diplomacy and secured guarantees that, although it remains outside the banking union, its voice can be heard.
When the euro was conceived, the banking sector – and the risks of instability and contagion it brought – was overlooked. Now, after at least five desperate years playing catch-up, leaders are closing the hole. It looks like the ECB will get the remit and the tool kit to act as a tough and efficient watchdog.
Limiting its scope to the 150 biggest banks should mean the union will be able to do more than rubber stamp institutions and be swamped with work. Simultaneously, the ECB will still be empowered to deal with any small bank that seems to need special attention. German saving banks did not get the carte blanche they lobbied for.
Yet the banking union deal falls way short of a full-scale fix for the euro zone's woes. Direct recapitalization of stricken banks will not happen before 2014. It will only take place then if an efficient supervisory mechanism is in place.
The next big task, for 2013, is to hammer out a joint resolution mechanism for stricken financial institutions. This will be legally challenging and also entail tough decisions on the question of who eventually is going to pay the bill. One thing is for sure: the bickering will return soon.