Eurozone’s bank resolution mechanism takes a blow

EU Finance Ministers and Central Bank Governors focussed their attention on the Banking Union, financing SMEs and the EU economic outlook on the first day of the Informal ECOFIN meeting in Vilnius. (Lithuanian Council Presidency , photographic library 14/9/2013)

EU Finance Ministers and Central Bank Governors focussed their attention on the Banking Union, financing SMEs and the EU economic outlook on the first day of the Informal ECOFIN meeting in Vilnius. (Lithuanian Council Presidency , photographic library 14/9/2013)

It is very interesting to note how the various sides reported on the workings of the first meetings of ECOFIN and Eurogroup councils after the summer break. Seemingly the 28 ministers of Finance and the 17 of them making up respectively the two bodies discussed all the burning economic and financial issues, from the disbursement of the next financial aid trance to Cyprus to the weak economic growth and the woes of the SMEs. However the thorny issue must have been the banking union and the Single Resolution Mechanism for Eurozone’s failing banks. However reporting on all that from Vilnius was very selective and varied largely. Let’s see how the different Press releases issued by the various EU bodies covered the whole affair.

The Lithuanian Presidency informed us that “During the working lunch, the EU Finance Ministers discussed the Single Resolution Mechanism (SRM) for the first time at the ECOFIN level”. As reported by the Commission services Ollie Rehn in the Press conference after the two councils was rightly but almost exclusively worried about how the south Eurozone SMEs can finance their investment plans on equal terms as their peers in the north. Last but not least the Press release issued by the Eurogroup services covered extensively the Cyprus issue and Jeroen Dijsselbloem was depicted to make a very vague reference to the Banking Union. Actually only one sentence is devoted to the SRM in all those Press releases.

Michel Barnier

Nobody made any reference to what Michel Barnier had to say in Vilnius about the SRM for Eurozone banks. However only two days ago the good Commissioner speaking in Frankfurt at the opening of the academic year of the Centre for Financial Studies of Goethe University promised that he will bring this burning issue at the Vilnius gathering of ECOFIN.

On that occasion Barnier told his German audience that “if we want to have a fully fledged banking union, we also need a ‘Single Resolution Mechanism’…The Commission made an ambitious proposal in July. I know that Germany, in particular, has some concerns, as regards the role of the Commission and as regards the legal basis. We are confident that our proposal is legally solid. I will repeat this later this week in Vilnius when I meet the EU Ministers of Finance and Governors of the Central Banks”.

Is it possible that Barnier broke his promise? Certainly not. Presumably the single resolution mechanism for Eurozone banks was the main issue in both the informal ECOFIN and the Eurogroup councils in Vilnius. As Barnier said thought Germany “has concerns” about this issue. Especially now with the legislative elections in this country being held in one week and the public opinion having had enough about Eurozone’s financial needs. This may explain the radio silence about the SRM.

The Greek tragedy was all the Germans could take before going to the polling stations. Another electoral debate about additional financial obligations for Germany stemming from the enactment of the SRM could greatly help the Eurosceptic political formations only days before the vote. That’s probably why nobody in the Vilnius gathering wanted to advertise that the central issue was the ESM.

At this point it must be noted that the European Commission and Michel Barnier personally are pressing ahead with a proposal to enact a central bank resolution authority in Brussels under the EU’s executive arm, thus securing the functioning of the SRM. Of course this central authority under Commission’s roof would centralise also the financial obligations which will certainly stem from an eventual resolution of a failing major Eurozone bank. To this efect Barnier also recognises that the resolution authority while resolving banks would need access to funding. This funding however would diffuse the banking risks all over Eurozone by mutualising the liabilities to be left behind the resolution of a major bank.

It’s the same old story

Obviously the largest part of those liabilities will burden the German taxpayers. To mitigate that Barnier proposes to impose a special levy on all Eurozone banks to fund a resolution cushion, thus avoiding to burden taxpayers. This levy though is a very vague option because its legal base is rather unsound. Already the Commission’s proper lawyers said this week that the imposition of a special financial tax (The European financial transaction tax – FTT) in twelve willing to do so EU countries (Tobin Tax) is illegal.

All in all this last turn undermines directly the Commission’s proposal for a central Single Resolution Mechanism to deal with failing Eurozone banks from Brussels. That’s why only the Lithuanian Presidency made a vague reference to the SRM while everybody else including the Commission and Eurogroup’s Presidency had nothing to reveal on the matter. Unfortunately it’s not only the German election of 22 September that stopped the reporting on the SRM. Berlin will certainly continue strongly opposing the central option for this Mechanism even after the election.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

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

Scaling for success: SMEs, tech innovations and the ITU Telecom World Awards 2019, in association with The European Sting

How global tech can drive local healthcare innovation in China

Main results of Foreign Affairs EU Council, 16/07/2018

Black Panther’s ‘General Okoye’ joins the fight against gender-based violence

Commission reports on progress in risk reduction in the Banking Union and calls for faster progress on Capital Markets Union ahead of EU Leaders’ meetings

Voices of Afghan women ‘must be heard at the table in the peace process and beyond’ UN deputy chief tells Security Council

7 surprising and outrageous stats about gender inequality

“16+1” Cooperation injects new vigor into China-Europe cooperation

Tuesday’s Daily Brief: UNESCO ready to help after Notre Dame fire, and updates on Libya, Nicaragua, and the Cyclone Idai response

UN chief welcomes establishment of inclusive government in Central African Republic

Brussels terrorist attacks: Schengen in danger once again while leaders gather Europe’s multiple broken pieces

Social entrepreneurs can change the world – but these 6 things are holding us back

Ahead of street protests, UN rights chief urges Guatemalan Government to respect democratic freedoms

How Finland is fighting fake news – in the classroom

UN food agency begins ‘last resort’ partial withdrawal of aid to opposition-held Yemeni capital

Somalia: UN mission head condemns deadly terrorist attacks in Mogadishu, Galkayo

FROM THE FIELD: 10,000 Indonesia quake survivors to receive UN tents

‘Highly explosive’ escalation of conflict and displacement across Syria’s Idlib, says top UN official

Malaysia has achieved high levels of growth, but must do more to address governance and social challenges

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

The refugee crisis brings to light EU’s most horrible flaws and nightmares

Global Leaders Take The Stage At MWC Shanghai 2019, in association with The European Sting

The business case for diversity in the workplace is now overwhelming

Thailand gave healthcare to its entire population and the results were dramatic

MWC 2016 Live: Industrial world prepares to reap digital benefits

Young health workforce – a core of effective primary healthcare?

Thursday’s Daily Brief: Safeguarding civilians, strengthening Ebola response in DR Congo, marking Fistula Day, updates on CAR and Syria

Ebola outbreak in DR Congo conflict zone ‘remains dangerous and unpredictable’ – UN chiefs

This is what countries are doing to fight plastic waste

Release of prize-winning Reuters journalists in Myanmar welcomed by UN

EU Ambassadors in the EP: a multilateral approach to global challenges needed

WEF Davos 2016 LIVE: “No other problem has jeopardised the EU as much as the refugee question” Joachim Gauck, President of the Federal Republic of Germany, cries out from Davos

Charlotte in Ghana

Robots will soon be a necessity but they won’t take all our jobs

Here’s how we get businesses to harmonize on climate change

Following the World Cup? Then you’re watching high-performing migrants at work

Mood changes in Europe in favour of growth and jobs

Do the giant banks ‘tell’ Britain to choose a good soft Brexit and ‘remain’ or else…?

Community Manager – 1289

UN forum spotlights cities, where struggle for sustainability ‘will be won or lost’

MWC 2016 LIVE: CEOs issue rallying call to drive ‘gigabit economy’

US-EU trade war: Berlin fearful of the second round

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

How 5G can connect the affordable homes of the future

In Libya, Guterres ‘deeply concerned’ by risk of fresh military confrontation, urges restraint

“The winner is who can accelerate the transition to a new digital era”. The Sting reports live from EBS 2015: a Digital Europe 4.0

Millions of people eat octopus- here’s why we shouldn’t

Brexit: With May gone the Tory divide is to sink the UK despite Brits wanting to ‘Remain’

Better sanitation for India is in the pipeline

The ECB must extend its money stimulus beyond 2018: Draghi reckoning

Deaf advocate voices importance of sign languages as UN marks first commemoration

We’ve lost 60% of wildlife in less than 50 years

Luxembourg has achieved high levels of growth and well-being but must do more to preserve and share prosperity

United States: UN human rights office welcomes California moratorium on death penalty

Recognizing, protecting and empowering youth rights in Europe and the world

UN must provide redress for minorities placed in toxic Kosovo camps, says rights expert

3 things you need to know about securing a blockchain

Businesses succeed internationally

Growing up near green space is good for your mental health as an adult

168 hours left for MEPs – ECOFIN Council to deliver a Banking Union

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