EU FINANCE MINISTERS are meeting today to seek progress on how to close down a failing bank before it damages the underlying economy, a divisive issue for those reluctant to hand more power to Brussels.
Sharp differences emerged Friday at informal talks in Vilnius over a planned Banking Union, the new regulatory framework meant to ensure that the taxpayer no longer foots the bill for bailing out over-extended banks.
The idea was accepted initially as essential to head off future crises, but several member states, including Germany and non-euro Britain, are now uneasy about how it will be implemented in practice.
“So far there have been cannon shots going back and forth,” Dutch Finance Minister Jeroen Dijsselbloem said as he went into Saturday’s meeting.
Dijsselbloem, who is also head of the 17 eurozone finance ministers group, added: “We will have an interesting debate over the next few months … we should have these discussions rather quickly and finish by November, December.”
He insisted that the Banking Union plan was not being watered down, noting that much progress had been made, with the first step, the Single Supervisory Mechanism, approved Thursday by the European Parliament.
The sticking point now is a proposed Single Resolution Mechanism that will work with the SSM and in time be followed by Deposit Guarantee System to reassure depositors that their money is safe even at times of stress.
The current plan is for the SRM to operate under the European Commission, the EU’s executive arm, but that would mean a huge expansion of its powers.
EU Financial Markets Commissioner Michel Barnier, who described Friday’s exchanges as a “challenging debate”, repeated that the Commission was not looking to take on the job but it had to take the lead given the need to stabilise the banking system and get it lending again to business.
“If someone comes up with a better idea, I am ready to work on it,” he said.
German Finance Minister Wolfgang Schaeuble made no comment as he arrived, but on Friday he said that while the SRM could go ahead initially, a better mechanism would need changes to the EU’s core treaty.
Reopening the treaty is potentially fraught as old issues which took years to nail down could be revisted.
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