Europe’s shotgun wedding

24th September 2012

"Three months into Europe's quest for a unified banking sector, what's being sold as an essential union for securing the Continent's financial future is looking increasingly like a shotgun wedding." That's the view of a Wall Street Journal editorial as it analyses the remains of last weekend's EU talks in Nicosia which were designed to rubber stamp the bloc's quest for a banking union but instead morphed into disagreements over the spectre of a single banking supervisor.

According to the piece, Germany, the Netherlands and Sweden doubt that a functioning regulator can be up and running by January 2013 (which is the first deadline). They also wonder whether a pan-European regulator's energies would be best spent supervising all lenders or only the biggest players.

In addition, "France and Spain are encouraging haste, partly because their banks are likely to be early beneficiaries of a banking union. Not that Germany's intentions are necessarily purer: Limiting the supervisor's scope looks like a way to get a carve-out for Germany's politically connected regional banks."

And in a speech to lawmakers in the European Parliament, Andrea Enria, the chairman of the European Banking Authority, warned that a banking union could create divisions within Europe. "We risk a polarization … between the euro area, with single rules and supervisory practices, and the rest of the (European) Union, which would operate with a still wide degree of national discretion in … applying the single rulebook," he said.

A Bloomberg View editorial piece, meanwhile, argues that in the end, though, it comes down to this:

"If Europe can't accept the limited degree of fiscal union that includes a single bank-resolution authority and a deposit-guarantee system, all its talk of creating a true banking union is so much hot air…..Failure to act would be a grave error. A European banking union is essential to break the connection between distressed banks and sovereign insolvency. After all, that is the motor driving Europe's financial crisis. The pressure of events has seemed to abate since Draghi announced his bond-buying plan. The ECB has bought Europe some time. Governments should resolve to use it, not waste it."

Indeed, "too often in Europe's crisis," the Wall Street Journal laments, "solutions have come together ad hoc, without offering any comfort that national interests are being either protected or surrendered to the EU on agreeable terms."

"The Commission's plans look like an attempt to get the money in the EU bailout funds flowing into Europe's banks as quickly as possible. But if there is to be a banking union, it should be about creating a true single market for financial services, not simply greasing the euro-skids for more bailouts."

 

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