Germany and France only care about keeping their borrowing cheap

The Dublin Castle. (EC Audiovisual Services).

The two days of unofficial meetings of the Ecofin and the Eurogroup councils staged in the historic scenery of the Dublin Castle completely missed their targets. For one thing today’s main story, by Suzan A. Kane, on the European Sting proves that the much-advertised target to arrest the €1 trillion tax evasion in the EU was totally forgotten. Instead the two main decision-making bodies, which set the rules for the EU’s economy, just undersigned what was already decided in relation to failing banks’ rescues. That is to use the unsecured deposits, while dealing with  troubled lenders.

Even the creation of the much-needed Banking Union was undermined this weekend by Germany, with Berlin and Paris always promoting their joint policy target for a fragmented Eurozone financial market. In a solid proof of that, the German minister of Finance, Wolfgang Schauble, stated clearly yesterday in Dublin that the creation of the Banking Union presupposes an amendment of the Treaties of the European Union. This new impediment will certainly postpone the Banking Union for years.

The Banking Union can wait

It is obvious that Germany, aided in this by France want to keep the Eurozone financial market as fragmented as possible. At the same time both countries work hard towards the standardisation of the failing bank rescue procedures, to comprise the use of the unsecured deposits in a bail-in process. The German-French axis performed perfectly in this direction during the weekend. In two different occasions the German minister of Finance Schauble undermined the Banking Union, while the French Commissioner Michel Barnier set the rules for the bank rescues to include the use of unsecured deposits.

In view of this concerted action by Berlin and Paris to neutralise the Ecofin and the Eurogroup and steer the Eurozone boat to the direction they have mapped themselves, the Irish Presidency of the Council chose to send the ball out of the pitch. It has to be mentioned though that in the Dublin Castle, Ireland wanted badly a decision for an extension by seven years of its loans from the EFSF. That is why the Irish Presidency after securing that from the Ecofin council, didn’t pay much attention to anything else.

The announcement the Irish Presidency issued late on Sunday 14 April reads as if Dublin knew nothing at all about bank rescues and Banking Union. The Press release said that, the Irish minister of Finance Michael Noonan noted, “This two day meeting of EU Finance Ministers has made significant progress towards Ireland’s Presidency objectives of stability, jobs and growth. I would like to thank all my fellow finance ministers for the positive contributions they have made during our informal meeting.”

It was evident that the Ecofin and the Eurogroup had decided nothing concrete to promote growth and jobs. The Berlin-Paris axis had only worked during the weekend towards the direction of securing a fragmented Eurozone financial market, where banks are to be rescued by their own means, including unsecured deposits. That’s all there is to it and it will continue to be like that in the coming years.

As for the European Commission, its vice President Ollie Rehn, all he had to say at the Press conference after the informal Ecofin Council was that, “We also had a very extensive discussion on the subject of Banking Union. Michel Barnier will discuss this in greater depth”. True, Barnier discussed this in-depth afterwards, by making sure that Germany and France could go on borrowing at much lower interest rates than the rest of Eurozone countries.