Denmark announces plan to join EU banking union

New ECB building

The new ECB building in Frankfurt. [Jonas M Luster/Flickr]

A new report by the Danish Ministry for Justice presented on Thursday (30 April) concludes that Denmark won’t be giving up sovereignty by joining the EU’s banking union. This means the country can proceed without having to first hold a referendum.

Denmark’s centre-left government wants the Scandinavian state to become part of the banking union, as it views it as being in the interest of its financial sector.

“The strengthened coorperation on banks contribute to financial and economic stability which will benefit Denmark. We believe it would be beneficial to take part in this strengthened coorperation. We will make our decision on the issue when we see how the coorperation works in practice,” the government said in a statement.

Denmark obtained four opt-outs from the Maastricht Treaty following the treaty’s initial rejection in a 1992 referendum. The opt-outs are outlined in the Edinburgh Agreement, and concern the Monetary Union (EMU), Common Security and Defence Policy (CSDP), Justice and Home Affairs (JHA) and the Citizenship of the European Union.

This means that the country often needs to set up referendums for new EU legislative initiatives, such as the Unified Patent Court poll last year, and the upcoming referendum on an opt-in solution for 22 juristical matters, which Denmark is prevented from being part of due to the Justice opt-out. The 22 issues include the cross-border Legal Aid Directive, the Cyber Crime Directive, and the Directive on combating the abuse and sexual exploitation of children. The referendum will take place before April 2016.

If two-thirds of the Danish parliament wishes to join the banking union, a referendum will not be needed. Though Danes tend to be Eurosceptic, most of the parties in the country’s parliament are pro-EU, which means that even with a change of government, a majority in favor of the banking union can be found.

The Eurosceptic Danish People’s Party, which, according to the latest polls, is Denmark’s third biggest party, and became the biggest Danish party in the European Parliament elections last May, was quick to criticise the government on Thursday.

“The government has today decided that Denmark should join the eurozone countries’ banking union. And this, without asking the Danes,” Kristian Thulesen-Dahl, the party’s leader, wrote on Facebook.

“The banking union is natural for the eurozone countries, so we will have to see whether this means that the government is preparing for Denmark to join the euro. The Danish population have rejected the euro twice in referendums and the government has to respect this,” Thulesen-Dahl continued.

The creation of the banking union was the EU’s first answer to the financial crisis. Six years ago, banks across Europe were stabilised using billions of taxpayer money to prevent the financial meltdown from turning into a major depression.

The common EU rules on banking will help to prevent bank crises and set out a common framework to manage the process, including how to wind them down in an orderly way.

Banking union ensures common implementation of the rules.

In November 2014, the European Central Bank (ECB) became the supervisor of all 5,500 banks in the euro area, in the framework of the Single Supervisory Mechanism. In order to ensure that the ECB has a clear view of the situation of banks it supervises, a comprehensive assessment of banks’ financial health was carried out in 2014.

At a summit in October 2012, 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.

  • 14 Sept. 2015: Deadline for Danish general elections.
  • April 2016: Deadline for referendum on 'flexible' opt-in on Justice matters.

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