Angela Merkel, German Federal Chancellor (on the left) and Francois Hollande, President of France in the European Council, meeting of 22 May. (EC Audiovisual Services, 22/5/2013)
Safeguarding the basics of the Franco-German unity, which functions as the powerhouse of the European Union, had another victim. The French President Francois Hollande and the German Chancellor Angela Merkel agreed yesterday in Paris to undermine the effectiveness of the European Banking Union. Instead of a strong central and financially independent bank resolution authority in the context of the EBU, they said they support a loose cooperation in bank resolutions, where national authorities would be responsible for the work on the spot, without central financial support from the European Stability Mechanism (ESM).
Actually this was not a compromise but rather a full acceptance of the German position by France. In reality however Paris had never fully supported the European Central Bank’s proposal for a strong central bank resolution authority, in the heart of an effective European Banking Union. Francois Hollande though had joined Enrico Letta, when the Italian Prime Minister asked for a real and strong banking union. Such an option could help create a seamless financial market all over Eurozone, securing for all SMEs the same credit opportunities for similar business dangers, eliminating the largest part of the country risk.
France ‘sold’ the South
Of course France belongs to the core of the European financial markets and its own SMEs are favoured by the cheap ECB liquidity as their German counterparts. It’s the Italian, Greek, Spanish, Portuguese and other SMEs which are almost completely cut off from banking credit and when there is for them a borrowing option, the interest cost is at least triple than in core Eurozone countries for the same business risks. In short France ‘sold’ the south of Europe in order to safeguard the Berlin-Paris axis.
The pretext for this change of the French attitude was that the enactment of a strong Banking Union and a central bank resolution authority with access to European Stability Mechanism backing needed an amendment of the European Treaties. However this is exactly what the German minister of Finance Wolfgang Schaeuble supported in an article published on 13 May in the prestigious newspaper Financial Times. In this article he wrote, “The European Commission will soon put forward a proposal for a resolution mechanism. We will assess it with an open mind. Yet while today’s EU treaties provide adequate foundation for the new supervisor and for a single resolution mechanism, they do not suffice to anchor beyond doubt a new and strong central resolution authority”.
A loose banking union
In short France adopted almost entirely the German position, that in order to create an effective bank resolution mechanism within a Banking Union, there should be first an amendment of the European Treaties. This position would delay for years the accomplishment of this project.
On 28 May the European Sting writer Maria Milouv wrote, “Michel Barnier the European Commissioner responsible for the Internal Market and Services in a clear-cut way broke yesterday Commission’s silence and joined the European Central Bank’s approach, over the creation of an effective European Banking Union, able to guarantee that failing or about to fail banks will be duly resolved or managed by one central and powerful European Resolution Authority…In this way he gave a clear indication of the model the Commission envisages and he stressed that the authority, “will do more than just coordinate work between national authorities”. He then added, “We have seen the limits of coordination.”
Michel Barnier, the French EU Commissioner was supposed, until yesterday, to also represent authentically Paris’s positions in the dealings of the European Commission. Unfortunately, President Hollande reversed this, and let his country’s Commissioner in the air. Now the Commission and the ECB would have to confront the Berlin-Paris axis in their quest for a banking union for all.
Speak your Mind Here