The proposed plans for the European Central Bank to take an integral role in European integration has reached an impasse as France and Germany, former allies in the quest for a more unified Europe came to blows.
The two powers are in disagreement over parts of the plan, major questions remain unanswered, such as how many banks will the ECB directly supervise and whether the bank gets more time than originally penned to fully take on its new role.
After three years of piecemeal crisis-fighting measures, agreeing on a banking union would lay a cornerstone of wider economic union and mark the first concerted attempt to integrate the bloc’s response to problem lenders.
EU leaders want to finally sign off on the plan when they meet at a summit on Thursday and Friday but they will need to address the concerns of Germany, whose support is vital and calm the nerves of opponents such as Britain, Sweden and the French.
Germany is worried that ECB supervision could lead to a conflict of interest within the ECB as it tries to balance its roles as a protector of monetary policy and supervisor. In an open display of clashing opinions the German Finance Minister Wolfgang Schaeuble publicly argued with his French counterpart at a meeting that was supposed to finalise the plans. Schaeuble objected to the ECB’s Governing Council having the final say over monitoring banks, a stance that appeared to push the talks backwards.
France also has demands.
“We can envisage degrees of supervision depending on banks’ size, but on one condition – that in the end, the European Central Bank holds the ultimate responsibility,” French Finance Minister Pierre Moscovici told Reuters earlier this week.
This concern is shared by analysts. “The ECB ultimately is the Governing Council,” said Guntram Wolff of Bruegel, a think tank in Brussels. “Not leaving the final say with the Governing Council means you create a new institution. If you create a new institution, it would not have the credibility of the ECB.”
European leaders appear to be confident that the plan will be ratified over the next year but all 27 European Union members must agree to the plans going ahead. Such an agreement is in doubt as Britain, Sweden and others are highly sceptical. Britain has demanded a voting scheme for countries outside the single currency to block certain decisions taken by the ECB, a veto that is opposed within the Euro zone.
As is the norm for the European Union only time and possibly a fair few summits will be needed before a decision is decided upon, until then we can be sure to see the usual arguing and name calling.
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