German Chancellor Angela Merkel said on Friday that a single European banking supervisor would be built up in the course of next year and must be completed before euro zone rescue funds may directly recapitalize troubled banks.
"We give our finance ministers the ambitious task of establishing a legal framework (for supervision) by January 1, 2013. This banking supervision will then be built up in the course of 2013," she told a news conference after EU leaders reached a deal on a timetable for launching the initiative.
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She said another EU summit in December would set a timeframe for deeper economic integration in the single currency area.
(Reporting by John O'Donnell; Writing by Paul Taylor)