Despite strong German opposition, the European Commission on Wednesday unveiled plans to set up a single body to deal with failing banks.
Regarded as a pillar in Europe’s so-called banking union, the new plan would allow the Commission to shut down any of Europe’s struggling banks, even if the national authorities disagree.
The proposal is seen as an attempt to break the vicious link between indebted national governments and problematic banks.
‘There is like an obvious interdependence in the Euro zone between States and banking institutions. In the Dexia and Fortis cases just to mention them as an example, we saw that we didn’t have the necessary decision process to resolve a bank and we are going to put an end to that fragmentation. We are going to equip ourselves to provide in advance to decide together and resolve together’, said EU commissioner for Internal Market and Services Michel Barnier.
Under the Single resolution Mechanism, a resolution fund worth 55 billion euros would also be set up.
However, the new proposal may put the Commission on a collision course with Germany. The biggest eurozone economy believes that such a mechanism is not compatible with EU treaties.
‘We put on the table of Heads of States, governments and MEP’s, a capital requirement fund, a single supervision and now we are putting on the table the tools and means to organise well-prepared resolution and repair’, said EU commissioner for Internal Market and Services Michel Barnier.
Earlier in June, EU leaders agreed to make a decision on the mechanism by the end of 2013, leaving time to be adopted before the end of the current European Parliament term in 2014.