The Banking Union divides deeply the European Union

ECOFIN Council, Luxembourg, 21/6/2013. (From left to right), Jeroen Dijsselbloem President of the Eurogroup, Anders Borg, Swedish Minister for Finance, Pierre Moscovici, French Minister of Finance. (Council of the European Union photographic library).

ECOFIN Council, Luxembourg, 21/6/2013. (From left to right), Jeroen Dijsselbloem President of the Eurogroup, Anders Borg, Swedish Minister for Finance, Pierre Moscovici, French Minister of Finance. (Council of the European Union photographic library).

As the European Sting predicted the ‘Friday battle at Ecofin’ Council was not about the specific country recommendations of the Commission, or about the seven-year extension of the loans to Portugal and Ireland, nor on the direct bank recapitalisation instrument. It was the very issue of the creation of the Banking Union and its core tool the bank resolution authority or rather authorities that divide the Europeans. The too short reference on this subject by Ollie Rehn after the meeting in Luxembourg yesterday tells the tale best: “We took one big step towards a banking union yesterday, and I expect another one tonight”, he said.

Just one step

Rehn’s “one step towards the banking union yesterday” in the Eurogroup was amply analysed by the Sting writer Elias Lacon in his article “IMF v Germany: Eurogroup keeps the fight under control”, published at mid-day of 21 June. This is about the direct recapitalisation of banks by the European Stability Mechanism, the main features of which were decided by the Eurogroup on Thursday evening.

They are so complicated and stiff to the point that it is questionable if they can be put into action any time in the distant future. As for the retroactivity of the direct recapitalisation it will remain a Greek dream for years. In any case the Ecofin Council set a €60 billion limit out of ESM’s money that can be used to this purpose, a quick backstop which renders the whole affair almost meaningless. The retro-activation only in the case of Greece can absorb €48.5nb.

Which banking union?

Finally the heavy fire against the banking union and more precisely against the institutionalisation of a strong and central bank resolution authority as the Commission wants it, came from a rather unexpected source, Sweden. Anders Borg, the minister of Finance of this country while coming to the gathering said that the Eurozone countries are preparing a dangerous scheme for everybody else. He meant what European Sting writer George Pepper described in his 20 June article under the title “Ecofin: ‘The Friday battle’ for the banking union”. It went like that, “Consequently the end result may be that the future bank resolution authority could end up recovering entire countries not only banks. The cases of the Irish banking crisis in 2010 and of Spain in 2011 are perfect examples of that”.

This is exactly what the careful Swede meant by referring to a dangerous game played by the Eurozone countries. Not to forget that the non Eurozone members of the EU can join the banking union. Of course a Brussels answer to Stockholm may be ‘you can very well stay out’. Sweden however had its own problems with banks more than ten years ago and it took many years of austerity and hard work to overcome it. Consequently Sweden is very careful with those things and probably wouldn’t like to stay out of an EU Banking Union to its liking.

In this respect the Commission could have also observed to the Swedish minister, that the whole idea of the banking union is to cut once and for all the unholy bonds between major bank balance sheets with the corresponding sovereigns in all member states. Presumably this will be one of the main targets of ECB’s supervision over all lenders. Still however those connections are so huge and many that it might take years to eliminate them and Eurozone wants the banking union to be operational in 2015.

In any case the Swedish minister of Finance insisted that the task of bank resolution and recovery should be left almost entirely to national authorities and obviously he disagrees also with the use of ESM money in this affair. No wonder if the German minister of Finance, Wolfgang Schauble, was on the same side with the Swede.

Truly the Ecofin Council of Friday must have been a real battlefield. The ‘centrists’ camp may have been formed by the European Commission and almost all Eurozone countries, while the decentralised option for the bank resolution authority(ies) may have been led by Germany, supported probably by France and some other countries, Sweden of course included.

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

COP21 Breaking News_05 December: UN Secretary-General Announces “Climate Action 2016” Partnership

A dangerously hot climate, simmering political tensions: ‘This is not the summer of our youth,’ UN chief warns

China-EU Trade and Economic Relations in Numbers

This is the world’s biggest mental health problem – and you might not have heard of it

Lagarde’s metamorphoses, not a laughing matter

Davos participants call for digital trade deal

COP21 Breaking News_03 December: Transport Industry Drive for Improved Energy Efficiency and Electro-Mobility to Stem High Growth of Emissions

Eurozone set to abandon monetary and incomes austerity and adopt growth friendly policies

Education critical to ensure future of forests, and reverse their destruction

How AI and machine learning are helping to fight COVID-19

Can free trade deliver cheaper renewable energy? Ask Mexico

State aid: Commission approves €50 million Italian support scheme for production and supply of medical equipment and masks during Coronavirus outbreak

3 lessons from running an AI-powered start-up in Africa

Better sanitation for India is in the pipeline

It will take a lot more than free menstrual pads to end period poverty

What’s going on in Chernobyl today?

Energy Union: Commission calls on Member States to step up ambition in plans to implement Paris agreement

Working when sick is rising and harms you and your employer. This is why

World Malaria Day: 7 things to know about the deadly disease

Service and Sacrifice: Malaysian peacekeepers in Lebanon proud to serve their homeland and the United Nations

Turkey: Extension of EU humanitarian programmes supporting 1.7 million refugees receives green light

Asia-Pacific ‘regional parliament’ underway to advance equality, empowerment, for more than four billion citizens

Summer 2018 Interim Economic Forecast: Resilient Growth amid increased uncertainty

The Working Methods of the von der Leyen Commission: Striving for more at home and in the world

YO!Fest back in Strasbourg for the 2nd edition of the European Youth Event – 20-21 May 2016

‘Critical test’ for North Korea’s Government as civilian suffering remains rife, warns UN rights expert

From mental health to suicide: the interruption of this chain reaction by prevention

Antitrust: Commission fines hotel group Meliá €6.7 million for discriminating between customers

Do all you can to resolve climate change ‘sticking points’ UN chief urges South-East Asian leaders, in Bali

Panic buying of face masks and other supplies puts healthcare workers at risk, says WHO

What are Asia Pacific countries getting right in the fight against cancer?

UN chief praises Malaysia’s death penalty repeal as ‘major step forward’

UN film festival encourages young people to promote peace, dialogue and empathy

Roxane in Cambodia

The ethical dilemmas of medicine

Aid convoy for north-east Syria postponed over security concerns – UN relief chief

5 reasons to be more cheerful about the future of the oceans

Brexit talks stalled at launch; issues with European Court’s authority in Britain

Does research make sense any more? The dire need for new ways to measure success

Turn toxic e-waste into a source of ‘decent work’, UN labour agency urges

Macron crowned king of Europe in Washington D.C.; just a working meeting with Trump for Merkel

Can green bonds help us manage climate risk?

Parliament seals 2014 EU budget and the spending ceiling until 2020

More than 750 million people around the world would migrate if they could

Press coverage of migration crisis in Europe: a call for collaborative action

How India’s government can build better contracts with blockchain

The Swiss will pay dearly for voting out fellow Europeans

European Citizens’ Initiative: Commission decides to register 2 new initiatives

China Unlimited: the dragon’s long and winding road

To Brexit, or not to Brexit…rather not: 10 Downing Street, London

After this year’s Climate Action Summit, what happens next?

What are we actually working for?

EU Commission and ECB rebuff Germany on the Banking Union

Drinking water: new plans to improve tap water quality and cut plastic litter

MWC 2016 LIVE: Freemium MVNO model a success, claims FreedomPop head

On Kristallnacht anniversary, UN chief urges renewed fight against ‘crime’ of anti-Semitism

‘Hateful attacks’ pushing Sri Lanka backwards, UN advisers warn, urging an end to ‘discriminatory practices’ that feed intolerance

The Sino-American trade conflict may be resolved soon

State aid: Commission approves €12 million Danish scheme to compensate damages caused by cancellations of large public events due to COVID-19 outbreak

More Stings?

Advertising

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