EU Commission challenges Berlin by proposing breakthrough legislation on banks

Michel Barnier, Member of the EC in charge of Internal Market and Services participated in the 4th Annual Economic Forum in Helsinki, (EC Audiovisual Services, 7/6/2013).

Michel Barnier, Member of the EC in charge of Internal Market and Services participated in the 4th Annual Economic Forum in Helsinki, (EC Audiovisual Services, 7/6/2013).

In an inspired speech last Friday, in Helsinki the European Commissioner Michel Barnier, speaking at the 4th Annual Economic Forum, made crystal clear that the Commission has not abandoned the target of a strong and effective European Banking Union. He stressed that “We cannot have a genuine Economic and Monetary Union without a Banking Union”. Of course he clarified that this new EU institution will also make sure that the umbilical cord between the major national banks in certain member states and the sovereigns is cut off.

The Centre for European Studies, a Brussels think tank, close to the European People’s Party, organised during the Forum a conference entitled, “Banking sector, finance and regulation: a strong pillar for the real economy”. The EU Commissioner participated in it and delivered a speech entitled “Financial regulation: laying sound foundations for stability and growth in Europe”. This tribune was the best opportunity for Michel Barnier to address the burning issue of the EBU and more precisely the single bank resolution authority and the single bank resolution mechanism.

A breakthrough

This issue has become a core theme for those like Barnier, who want a genuine EBU guaranteeing that the more than 6,000 Eurozone banks are being supervised effectively and can be trusted as guardians of value and effective financial intermediaries. He said that in the new and more controlled and demanding but safer financial environment of the EBU, it has to be ascertained that the Eurozone’s banks would be able to serve the real economy and more so the small and medium enterprises, securing financial services, “In particular to SMEs, which are highly dependent on bank financing”.

He commenced his speech by taking stock of the work that has been done so far for the banking union. He mentioned the agreement between the EU Parliament, the Commission and the Councils over the Capital Requirements Directive, the so-called ‘CRD IV package’, applicable in all 27 member states. He continued however and observed that this is not enough for Eurozone, obviously because the 17 euro area countries operate in a single currency union. In this environment however the countries of the south are disadvantaged, because they were not accustomed to a strong currency environment and today they are almost completely cut off from the core Eurozone financial markets. As result their real business sector and particularly their SMEs are suffocated without financial backing.

At this point Barnier found the opportunity to make a crucial announcement stating that “We (the Commission) will propose a Single Resolution Mechanism this summer”. He also announced that “for countries belonging to the Banking Union, we need to establish a common resolution fund. With one centralised resolution authority”.
By this statement he totally opposed the opinion expressed by the German Minister of Finance Wolfgang Schäuble, who insists that the enactment of a central resolution authority presupposes a change in the EU Treaty, let alone the establishment of a common resolution fund. Actually this problem is a very real one, because a common bank resolution fund would mutualise the risks hidden in the balance sheets of all Eurozone lenders. The Commission believes though that such a fund can be created without a change in the EU Treaty, and they argue that it can be fully embedded in the EU legal framework afterwards.

One real banking union

Before that Barnier had observed that the supervision of Eurozone banks by the European Central Bank “will open the possibility for the European Stability Mechanism to recapitalise ailing banks”. This is of course another bugbear for Germany, because Berlin bluntly denies sharing directly the Spanish, Greek, Italian and French bank risks through the ESM. Up to now the ESM is recapitalising the Greek, Spanish and Irish banks, but through loans to the corresponding governments, thus making the sovereigns liable for the risks and the money to be returned .

In this line of thinking Barnier also confirmed that the “Directive on Bank recovery and resolution. I hope it will be adopted in the next few days”. This is the new legal text defining the use of funds in cases of bank resolutions. By this statement Barnier confirmed what was already known, that is the order of funds to be confiscated in bail-ins. He said “shareholders, creditors and all other parties need to know in advance what to expect; while making sure that deposits under 100,000 Euros stay protected”. This is what happened in Cyprus at a time when this Regulation was not yet approved.

All in all Barnier confirmed that the European Commission will not back off in front of the German obstinacy. Actually the Commission in this affair is not following the usual practice of holding back action, which could damage the electoral prospects of a government. In this case the proposed mutualisation of banking risks for all Eurozone countries is a very unpopular issue in Germany. Obviously this Barnier announcement, if exploited by the opposition, may hamper Chancellor Merkel’s prospects for a triumphant win in the September election.

Advertising

Advertising

Advertising

Advertising

Advertising

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Central American migrants must be protected, urge UN experts

WEF Davos 2016 LIVE: “There is a communication issue (about China) which markets don’t like” Christine Lagarde, Managing Director of IMF stresses from Davos

Athens searches frantically for a new compromise between politics and economic reality

Medical Education is #NotATarget

Why the euro may rise with the dollar even at lower interest rates

Embrace ‘people-centered multilateralism,’ UN-civil society forum urges

Financiers can turn the world into a dirty and dangerous place

This lethal fungus is threatening to wipe out the world’s bananas

Over 40 million people still victims of slavery

EU Budget 2020 conciliation talks suspended

It’s not just the protests. Here’s how young people are helping the planet

Could the fourth wave of globalization help to end epidemics?

Why the internet is yesterday’s news in China’s digital leap forward

European Business Summit 2013: Where Business and Politics shape the future

Holocaust survivors rebuild lives and traditions in Rio de Janeiro

This is what CEOs around the world see as the biggest risks to business

EFSF/ESM boss tells half truths about Troika’s doings

Governments should step up their efforts to give people skills to seize opportunities in a digital world

Draghi’s negative interest rates help Eurozone’s cohesion

Smokers who quit one month before surgery reap benefits: UN health agency

Climate Change and Human Health: Two Faces of The Same Coin

Step up action to protect the planet during wartime: UN environment chief

Central Africans ‘need our help now’: UN’s deputy relief chief

We need to rethink the way we heat ourselves. Here’s why

Is it true that the G20 wants to arrest tax evasion of multinationals?

For how long and at what cost can the ECB continue printing trillions to keep euro area going?

EU-Western Balkans summit in Sofia

The challenges of mental health among the Syrian medical students

Is Erdogan ready to tear down the bridges with Europe and the West?

Is Europe misjudging its abilities to endure more austerity and unemployment?

Lagarde: Keep feeding the banks cut down wages and food subsidies

EU Leaders’ meeting in Sofia: Completing a trusted Digital Single Market for the benefit of all

Canada needs to increase foreign aid flows in line with its renewed engagement

Abandoned mines could become the farms of the future

Walk, cycle, dance and play – UN health agency recommends new action plan for good health

‘Champion for multilateralism’ readies to hand over UN General Assembly gavel

International trade statistics: trends in third quarter 2019

Cambodia: Giving back to UN peacekeeping

Environment and health at increasing risk from growing weight of ‘e-waste’

Colombia is a Latin American success story, but must pursue new reforms to achieve stronger and more inclusive growth

Mental health of health professionals: the alter ego

Rohingya refugee shelters ‘washed away’ in Bangladesh monsoon rains: UN agency

Syria: At least seven children killed in yet another airstrike

Tackling terrorism: MEPs approve tighter rules on homemade explosives

UN agencies urge Brunei to repeal new ‘extreme and unjustified’ penal code

Scores killed in ‘barbaric’ attack on Mali village, UN chief urges restraint, calls for ‘dialogue’ to resolve tensions

Public Health equality in a trench

EUREKA @ European Business Summit 2014: Innovation across borders – mobilising national R&D funds for transnational innovation in Europe

Sustainable Development Goals: making the world a better place

Long-term EU budget: MEPs lay down funding priorities for post-2020 budget

With the right leadership, sustainable finance can help us shift to a low-carbon economy

Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising

The European Parliament x-rays the troika’s doings

EU Ombudsman must continue push for more transparency in Council and Commission

In Rwanda, high-speed drones are delivering blood to remote communities

Catalan Pro-Independence vote: how many hits can Brussels sustain at the same time?

After the European Parliament elections – what happens next?

EU to fail 2050 Green targets due to lack of European citizens’ engagement

These are the top 10 emerging technologies of 2019

FROM THE FIELD: facing up to the extreme mental health pressures of conflict

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s