The European Union launched a bid Wednesday to
have more say on what should happen to troubled banks in the
eurozone, but was promptly assailed by Germany for acting illegally.
Politicians from across Europe have described the measure as key to shield taxpayers from bailouts and build a crisis-thwarting banking union. But Brussels and Berlin disagree on how it should be implemented.
"The (EU) proposal gives the European Commission competencies that it cannot have under the prevailing treaties, according to our interpretation of the law," said Steffen Seibert, spokesman for German Chancellor Angela Merkel.
"The proposal, in our view, unfortunately does not accelerate the way towards banking union, but rather will delay it," he added.
German Finance Minister Wolfgang Schaeuble had long warned that he didn't think there currently is a legal basis for anything more than a network of national resolution authorities. At the same time, his country insists that it remains committed to the banking-union goal.
The union is meant to restore trust in the eurozone, which is home to about 6,000 banks. But it also includes aspects that could annoy German voters ahead of parliamentary elections in September.
The VOB association of German public banks argued that "it is out of the question that contributions from German financial institutions for bank rescues be used by other member states."
The banking union's first feature is already set to start next year: a single bank supervisor - under the auspices of the European Central Bank (ECB) - which will watch out for trouble among lenders.
The EU is now seeking to create a single resolution authority that would oversee the closing or restructuring of any failing bank.
"A prepared and organized repair costs less than an improvised one," said Michel Barnier, the bloc's market regulation commissioner.
"This is to avoid what happened over the last five years - badly managing crises, not anticipating them, accepting that banks not be solid enough, ... only to then urgently, the back to the wall, ask the taxpayer to pay up," he added. "Enough of that."
Barnier is proposing that the commission ultimately have the power to decide what happens to a struggling bank - based on the recommendations of a new board made up of ECB, commission and national representatives.
Barnier acknowledged Germany's concerns, but argued that the treaties require an EU institution to take the decision and that none other could act as rapidly or knowledgeably as bloc's executive.
"I did not go looking for additional power for the commission. I looked at who could on a weekend, on a Sunday at 5 pm, press on the button," Barnier told reporters in Brussels. "We need a system which can deliver decisions quickly and efficiently, avoiding doubts."
The commissioner already made concessions to Berlin by adding a safeguard to his proposal that allows a country's finance minister to veto action on a bank if public funds will have to be involved.
"This will be exceptional, very rare," Barnier noted. "But nobody can rule out that at the end of the road, there might be a need for public money."
His proposal also features the creation of a 55-billion-euro (71-billion-dollar) resolution fund that would pool national resources for winding down banks, with that money coming from the banking sector.
The measures have to be endorsed by the EU's member states and legislature to become law. Initial reactions from the European Parliament were upbeat, with both right and left-leaning politicians welcoming Barnier's proposal.
The commissioner expressed optimism that a "compromise" would also be found with EU governments.
The bloc is under pressure to deliver fast, amid concerns that time is running short to complete the legislative process before next year's European elections.
Most Popular Stories
- Fed Committee Optimistic About Growth Prospects
- Pot's Legal in WA -- But You Should Probably Ask Your Boss
- Drive-In Movie Theaters Use Creativity to Afford Digital Switch
- How ESPN Became a $50B Sports Empire
- Obama Cites Letter Writers in Pitching Economy
- Pau Gasol Turns Down Lakers' Offer
- U.S. Immigration Courts Facing Record Backlog
- President Obama Relishes Roadshow, but Agenda Still Stuck
- Stevie Fielder Changes Tune on Thad Cochran Vote-buying Story
- Farrell, Kitsch Rumored for Season 2 of 'True Detective'