16 April 2009

Article: G20 confirmed the limits of multilateral decision-making.

Véron argues that the scenario whereby a major cross-border European bank would be found insolvent in the short term is becoming ever less improbable. Yet we have no credible policy framework to tackle it, he warns.

Member states are torn between the need to restructure their sick banks, and the desire to protect them from rivals in neighbouring countries, Nicolas Véron argues. Furthermore, the Commission possesses neither the political leadership, nor the resources and skills, nor the policy tools to make much of a difference. And finally, the ECB has enough to do on the monetary policy front. It cannot single handed take over the burden of supporting ailing banks.

 

Véron argues that the scenario whereby a major cross-border European bank would be found insolvent in the short term is becoming ever less improbable. Yet we have no credible policy framework to tackle it, he warns.

 

At present, Europe’s political leaders seem keen to steer clear of this problem, whose sheer magnitude apparently paralyses them, he complains. One day Europe’s banking sector will need intervention, Véron says underlining that this will imply “unprecedented institutional solutions”

 

The article “The European Banking Gordian Knot” was published in French in La Tribune, 15 April 2009.

 

The full article is attached below

 

© La Tribune