Wishing on Europe

From the outcome of the meeting on Banking Resolution closed last week a less foggy picture comes into bloom about the shape that the Union is going to take in the medium term. Besides the profuse rhetoric of a successful Banks Resolution Agreement and the less trumpeted plethora of exceptions to the rule itemized in the draft paper, it appears that the EU is evolving towards three blocks of countries showing alternative visions of Europe, hence different interests. We have the core Eurozone Federalists, the Eurozone procrastinators and the less enthusiast members that see the Union as a mere Common Market Area.

The leaders hinted last Friday that they want agreement by the end of the year on a way to resolve failed banks at European rather than national level. Well, that is wishful thinking as logics would suggest that in anticipation of Bank Resolution Mechanism (BRM) the Single Supervision Mechanism (SSM) should see the light and that will not be operative before the second half of 2014. Besides, German Chancellor Angela Merkel cast doubt on whether that timetable could be respected, as the creation of a European Authority with such powers would require a change to the EU Treaty (a diversion to mean: no decision before next September’s German elections); the French and Italians argued that the programme could be rapidly implemented by amending technical/juridical aspects of the Treaty leaving the political parts intact; the Commission proposed that this Authority could fall under its responsibility at least in the interim, overlooking the fact that, as a political entity, the Commission has no technical expertise on the administration of a banking body.

The revision of the EU Treaty would take years to be implemented as national countries have different rules to get approval, hence varied times; it would be a constitutional matter for Germany while a referendum should be held by the Irish. Besides, the incumbent German coalition (CDU, SDP) will be challenged by the rising SPD and Greens in the September elections and it is not at all assured that Ms Merkel will save her position. Should this happen then the whole EU programme could take another twist.

The Single Supervision Mechanism and Bank Resolution constitute the European Banking Union, which involves tighter oversight of banks and coordinated resolution of potential problems. The purpose of the SRM is to clip incestuous links between banks and local political interests having strained local governments recently. Under the deal, investors and wealthy savers will (in principle) share the cost of future bank failures before taxpayers are called to contribute. The project envisages future potential failures only and excludes banks under current rescue plans. The law only sets common rules that national authorities in the 28-nation bloc have to follow when dealing with their own banks. It does not allow for sharing power or the financial costs of closing down or rescuing banks at EU level, at least not for the immediate, with many limitations for countries outside the Eurozone, like the UK. It is only a stepping stone to creating a central EU body to deal with failing banks comprising 1st tier financial institutions (circa 150) that operate across national borders; 2nd tier banks will be included at a later stage while minor banking institutes will be dealt with by national governments.

It is apparent how complicate the situation becomes considering that this kind of discussion is held at a comprehensive EU-28 level while the Eurogroup (Federalists) have their own agenda, the remaining Eurozone members have theirs and EU members having kept their own currency need more independence. Mr Cameron recently suggested that the Eurogroup should have a separate budget and dedicated meetings, a logical avowal, but logics, alas, not always rime with politics.

Moreover, it should be recalled that a number of small countries outside the EU (Iceland, Norway, Switzerland) are affected by the EU behemoth concerning legislation while they chose not to benefit of the intra-EU preferential goods’ tariffs.

Tweet about this on TwitterShare on Facebook0Share on Google+0Share on LinkedIn3
Author :
Print