14 January 2013

グラハム・ビショップの欧州金融サービス・マンスリー2012年12月号

The European Council of 13/14 December 2012 carefully avoided momentous decisions that would have immediate effects – but it still agreed on a ‘roadmap’ with decisions that keep the eurozone firmly on that road leading inexorably to a much greater degree of political union beyond 2014. However, the first milestone along that road is the enactment of the ‘two-pack’ and that is currently deadlocked between the co-legislators: Parliament and Council.

Naturally enough, failure to reach even the first milestone would raise serious doubts in the minds of the bond market vigilantes about the depth of commitment to the far-reaching goal of a genuine economic and monetary union (GEMU) repeatedly endorsed by the Heads of State or Government (HOSGs). The cancer attacking the eurozone is only in remission. Failure to enact the ‘two-pack’ could begin to unravel the whole process. That risks sparking another full scale attack if it becomes apparent that the process has already stalled and the roadmap leads nowhere!

Some of the Council’s legislative initiatives may fall foul of two deadlines. (i) The German elections in September 2013 are likely to make Chancellor Merkel particularly cautious about radical new proposals in the few months ahead of the elections. (ii) The European Parliament has already declared that it will not accept new legislative proposals after May. 

The HOSGs reiterated: “It is imperative to break the vicious circle between banks and sovereigns”:

• The Single Supervisory Mechanism (SSM) should enable the ECB to be in supervisory operation by March 2014, or 12 months after the relevant laws. But there are many contentious details to agree first – crucially on the definition of “legacy assets”, as this could pave the way for the ESM to recapitalise banks directly.
• The Directives on ‘Recovery and Resolution’ and ‘Deposit Guarantee Schemes (DGS)’: The HOSGs “urge co-legislators to agree before June 2013” but the EP’s report questions the whole basis of the Commission’s proposal and has not yet even been debated. So this timetable looks rather ambitious.
• A ‘Single resolution mechanism’ is to be proposed by the Commission during 2013 “with the intention of adopting [it] in the current parliamentary cycle”. ECB President Draghi has made it clear that the ECB’s ability to put even a ‘national champion’ bank into resolution is a key part of its supervisory powers. The idea that an acceptable plan will be proposed by May and enacted swiftly seems quite unlikely.

The stage is now set for a string of disappointments on financial integration all the way through 2013. The mid-2014 change of Parliament, and then Commission, means that this cannot be rectified before 2015. So the best available policy now seems to be to cross fingers and hope for good economic times.

Graham Bishop

© Graham Bishop