Whenever the ECB helps, the political process slows down, observes Münchau in his FT column. This is the true tragedy of the eurozone's crisis management.
This is how I would summarise the German position:
First, we do not really want a banking union all, but if we have to have it, we would like to limit the remit of the pan-European supervisor to a few large cross-border banks.
Second, ideally the supervisor should not be the ECB; if it has to be the ECB, there must be safeguards, stronger than those proposed, to ensure that monetary policy remains independent from the banking supervisor.
Third, there shall be no joint deposit insurance.
Fourth, the banking union shall not deal with any legacy risk, only problems that arise in the future. The Spanish bank programme remains a Spanish bank programme.
Fifth, the ESM should not be able to undertake direct bank recapitalisations until the banking union is fully implemented. This will take many years.
Whether or not you call this a banking union, or a breach of the June 29 agreement, is irrelevant. The point is that you cannot force through a banking union against the explicit will of the German government, the German parliament, the German public at large and the Bundesbank. I suspect the EU will ultimately agree on a fudge. But it would be irrelevant for the resolution of this crisis.
Jens Weidmann, president of the Bundesbank, last week said a banking union was a disguised transfer mechanism. On this point, he is right. A banking union would recapitalise Spanish banks at the expense of northern European taxpayers. This is the whole point of having it. It would be dishonest to deny that. A banking union, properly constructed, thus constitutes a fiscal union. This is not something you do before Christmas, or through a Directive.
The dwindling chances of a banking union put Mr Draghi in a tight spot. His OMT programme needs a banking union to work. The ECB’s liquidity backstops guarantees the banks, for now. The OMT guarantees the sovereign debt. As these programmes run out – which they eventually will – the eurozone needs an institutional framework in place to deal with the two intertwined risks of banks and sovereigns. A banking union would end that vicious circle. But even with a banking union in place, the eurozone still faces an equally formidable vicious circle of austerity and recession. The dynamics of the recession are alarming.
Whenever the ECB helps, the political process slows down. This is the true tragedy of the eurozone’s crisis management. We are now back at the point before Mr Draghi announced his programme – where the stated policies are inconsistent with a survival of the eurozone.
Full article (FT subscription required)
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article