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25/09/2016

Spain, France say banking union possible by year’s end

Euro & Finance

Spain, France say banking union possible by year’s end

banking_union.jpg

Spanish Prime Minister Mariano Rajoy urged more unity for Europe and said a banking union for the region should be finalised this month, El País reported in an interview published on its website late yesterday (8 December).

Spanish politicians are not impervious to the consequences of corruption, Rajoy told El País, and he denied any parallel accounting in his party in relation to a slush fund scandal that has dogged the centre-right People's Party this year.

The country recently tumbled 10 places to rank 40th in a global index of perceived official corruption following a spate of scandals in the ruling People's Party and the royal family.

Spain was at the heart of the eurozone debt crisis last year, but emerged from recession in the third quarter and is funding itself comfortably on the money markets once more following a European Central Bank pledge to defend the euro at all costs.

Rajoy said the worst was over for Europe and member states must now work towards greater growth and integration.

"What concerns me most is that all European governments, especially that of Germany […] have a clear view of where we are headed."

The remaining details regarding the supervisory banking union for the monetary union must be sewn up in December, he said.

"It's very important that all the decisions about the design of the banking union are finalised in December," he said. "The priority for Spain is that the matter is closed."

France too hopes a deal will be clinched on a European banking union before the end of 2013, the country's Finance Minister Pierre Moscovici said yesterday (8 December).

In Berlin on Friday European finance ministers and senior EU officials met to try to forge a compromise on rules to wind down stricken banks, with time running out to reach a deal by a year-end deadline.

"I hope that on Tuesday evening, maybe in the night of Tuesday, we'll reach a deal and if we don't succeed then we will succeed the following week when we meet on 18 December," Moscovici said ahead of next week's regular gathering of European finance ministers in Brussels.

Moscovici said Friday's meeting had been useful.

"Everyone moved a little," he said.

The sticking point is staunch opposition from Germany, and some of its northern European allies, to proposals that would give the European Commission new powers to wind down banks.

The European Union has said it wants to agree a deal on bank resolution, a key plank of its ambitious "banking union" project, by year-end. Failure to meet that goal could lead to significant delays in implementation because of looming European Parliament elections and changes in the makeup of the European Commission.

Background

At a summit in October last year, EU leaders agreed plans to complete the European banking union by January 2014, after the general elections in Germany.

The concession was made to German Chancellor Angela Merkel who argued for "quality" over "speed" in putting in place the new supervisory system, seen as a cornerstone of the EU's efforts to end the eurozone' sovereign debt crisis.

>> Read: EU summit deal aims for full 'banking union' in 2014

A new milestone in the EU’s efforts was reached in June when finance ministers struck an agreement on banking union that would force investors and wealthy savers to share the costs of future bank failures – or so-called ‘bail in’ – to shield taxpayers from unpopular bank bailouts.

The European Commission then tabled new proposals in July to complete the banking union with plans to establish a single euro zone authority to wind up failed banks – a move that fell foul with Germany.

>> Read: Commission seeks sweeping new powers over failed banks

Timeline

  • 10 Dec.: Ecofin meeting, Brussels
  • 19-20 Dec. EU summit [see draft agenda

Further Reading