Today the European Union took a step closer to implementing the controversial banking strategy it has been pushing for as the EU’s financial services chief Michel Barnier outlined the plan for a single resolution mechanism.
Barnier said of the proposal: ‘We need a system that can deliver decisions quickly and efficiently, avoiding doubts about the impact on public finances and with rules that create certainty in the market.’
The mechanism would give the Brussels-based European Commission the right to judge whether struggling banks should be shut or saved – possibly through the utilisation of public funds.
Although the plan has been designed to work in harmony with the European Central Bank’s supervision of financial institutions in the Eurozone, Germany has long been against the idea and believes that superseding national control in monetary concerns could be construed as a violation of standard EU laws. If approved, the mechanism would be able to tap markets with the backing of the assets held by the banks covered by it.
A spokesman for the German government today questioned the legality of Barnier’s plan and argued that it could upset the progress made by the EU in the establishment of a banking union.
However, Barnier was firm when he asserted that safeguards had been built into the plan so that national governments couldn’t be forced into using the money of its populace. Barnier commented: ‘The text states explicitly that the resolution board would not, in any scenario, be allowed to commit a member state’s public money without its agreement […] The German legal point is linked in particular to the question of fiscal sovereignty, and we are going to solve it.’
The Euro/US Dollar exchange rate was stronger as the European session progressed despite US data showing a slump in American wholesale inventories (indicative of a surge in sales triggered by a pickup in production and orders).
The ‘Greenback’ has softened slightly ahead of today’s influential news from the US on speculation that expectations regarding the Fed and hints about when easing will be tapered may be disappointed.
The Euro/Pound exchange rate continues to trade above 86 pence per Euro.
Euro (EUR) Exchange Rates
As of 15:50
The Euro/US Dollar Exchange Rate is currently in the region of: 1.2832 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8606 >
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.3998 >
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6410 >
The Euro/ Canadian Dollar Exchange Rate is currently in the region of: 1.3499 >