VILNIUS: Germany is working on a plan that would allow the completion of a eurozone banking union without changing existing EU law, potentially removing a major hurdle to finish the most ambitious EU project since the start of the euro, EU officials said.
So far, Berlin has insisted the 28-nation bloc needs to amend its Treaty if it is to move the power to unwind or fix struggling banks from a national to a European level.
The compromise solution that officials in Berlin’s Chancellery are working on, and discussing with European Union partners, would be a break-through because Germany’s insistence so far would cause a lengthy and politically risky process.
The eurozone badly needs a banking union to restore lending to the economy, regain confidence and boost growth so that struggling economies in the south can repay their debt. It would also help to prevent another sovereign debt crisis.
“The Chancellery is preparing a solution for after the German elections. They are working together with euro zone officials on this,” said one senior eurozone source involved in the negotiations.
In Berlin, a senior official said the government was thinking about many scenarios, not just one. Serious negotiations would only take place in November or December and were up to the next government, to be elected on September 22, the source said. The choice of plan would depend on the outcome of coalition talks.
EU officials were encouraged that Germany was now engaging in the negotiations, having so far pointed to legal obstacles. One Brussels official said the proposal had raised hopes for a solution by year-end even if positions were still far apart. The head of the EU’s finance ministers, Jeroen Dijsselbloem, said yesterday that work would pick up after Germany’s elections to set up the agency that could order the restructuring or closure of any eurozone bank.
Two senior eurozone officials said that according to the compromise proposal discussed in Angela Merkel’s Chancellery, Berlin could agree to set up a pan-European resolution agency on the basis of Artticle 114 of the EU Treaty. This legal base had been suggested as sufficient by legal services of the European Commission, the European Central Bank and the EU Council, but has not been endorsed by Germany so far.
However, in exchange the agency would only get to decide over the fate of the 130 eurozone banking groups that will be directly supervised by the ECB from the second half of 2014.
This would remove the smaller German savings banks, Sparkassen, often closely linked to local German politicians, from the remit of a European — rather than national — agency, officials said.
In order to avoid Treaty change, the Commission proposed earlier this year that it should have the final say on bank resolution itself even though it could act on the recommendation of a board that would include national authorities and the ECB.
Reuters
