10 April 2018

Financial Times: Euro area’s banking union heads for ‘critical phase’

Valdis Dombrovskis, European Commission vice-president responsible for the euro, said political negotiations on completing the banking union were entering a “critical phase”, and that failure could leave the project in limbo until after next year’s European Parliament election.

For that target to be reached, governments needed to deliver on their goal of brokering key compromises by a summit of EU leaders set for June. “What we need now is basically to politically unblock this discussion,” Mr Dombrovskis told the Financial Times, adding that talks were “approaching some kind of an endgame”.

Klaus Regling, head of the euro’s bailout fund, also ramped up pressure on governments to reach a compromise on the reform package or “ risk having to wait for the next crisis” to shore up the currency bloc.

“We seem to be losing the momentum, rather than seizing it” said Mr Regling, head of the European Stability Mechanism. “No country will get all that it wants, but each country will get something. For that to happen, national traditions and convictions will have to meet somewhere in the middle.”

The European Central Bank has stressed that completing the banking union is essential to making the financial sector, and by extension the euro, more shock resistant. The project, conceived during the euro area debt crisis, took financial supervision of big banks out of national hands and gave the responsibility instead to the ECB. It also led to the establishment of a euro area agency to handle failing banks, backed by a common fund.

But nations have been deadlocked for months over the next steps, such as the creation of a common scheme to guarantee bank deposits, and moves to give greater financial firepower to euro area authorities tasked with winding up failing banks.

Full article on Financial Times (subscription required)

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