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Partially translated from the German
As the Financial Times (subscription required) reports, Germany has hardened its stance on the common eurozone safety net for banks, insisting that eurozone countries impose losses on all bondholders in ailing banks before taxpayers’ money can be used to clean up the financial system.
Instead, German Finance Minister Wolfgang Schäuble told fellow finance ministers to follow Germany’s example and quickly pass national laws allowing full "bail-in" of senior and junior creditors in ailing banks, implying that joint eurozone backstops would otherwise be unavailable. "The retroactive bank recapitalisation is not probable for the time being", Schäuble told reporters. "In Germany, we need a change of German legislation", he said, adding that such a step could be "as difficult as a referendum in Ireland", reported Reuters.
According to the Süddeutsche, Schäuble's spokesman said that the instrument of direct bank recapitalisation did not yet exist and could only be created with German consent in the ESM Board of Governors. Therefore a law would have to be passed in Germany, and still every direct bank recapitalisation by the ESM would be dependent on the consent of the Bundestag. Luxembourg's Finance Minister Luc Frieden said he didn't think direct bank recapitaliation was possible at present, but the option should be realised in the future.
Mr Schäuble’s tough stance on creditors underlined Berlin’s resistance to using the European Stability Mechanism, the eurozone’s €500 billion bailout fund, as the ultimate public backstop for the ECB-led stress test next year. The FT further reported that diplomats took it as a warning that Germany would not sanction another Spanish-style bank recapitalisation programme – where eurozone loans are to the state, rather than in direct support of a bank – unless senior creditors also contributed fully. Mr Schäuble’s comments are a new twist on Germany’s long-running campaign to bring forward so-called bail-in requirements, a position staunchly opposed by France and a majority of Member States.
The Irish Independent quotes Irish Finance Minister Noonan has having said that he was not worried about Mr Schäuble's comments. "There is only a caretaker government in Germany at the moment as coalition negotiations continue - I don't know whether he will be the next finance minister in the next government or not", Mr Noonan joked.
More rows are expected along the way as Germany in particular does not want to give other authorities a say over the fate of its banks. According to the current outlook, a resolution mechanism could be operational at the earliest from 2015, reports the Tagesschau.