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The 28 EU states have set a year-end deadline to reach a common position on a proposal by Michel Barnier, the bloc’s financial-services chief, for a Single Resolution Mechanism. It would centralise the handling of euro area banks in financial trouble. Germany, Europe’s largest economy, has led the attack on Barnier’s plan, challenging its legal basis and warning it could weaken governments’ control over their budgets.
At the same time, the European Parliament has begun its own deliberations on the proposal. When the government leaders and the parliament have each completed their respective drafts, they’ll then hammer out a compromise. If this doesn’t happen before the elections scheduled in the bloc between May 22 and May 25, the decision-making machinery will go into hiatus. The parliament will divvy up committee slots, make internal appointments and hold hearings on candidates to join the commission, the EU’s executive arm. The next commission, almost certainly without Barnier, is scheduled to take office in November 2014.
“It is absolutely essential to get this out of the way and finished in this parliamentary session", Elisa Ferreira, the lawmaker who’ll be shepherding the proposal through the EU assembly, said in an interview. “It is this parliament that has the memory of the crisis and the response to it. It doesn’t make sense to leave it to the next parliament, which may not have this memory or the same priorities.”
German Finance Minister Wolfgang Schäuble, who rejects Barnier’s proposal and says it doesn’t have majority support among EU Member States, nevertheless shares Ferreira’s urgency. “We’ll have to see if we can agree on a common legal ground", Schäuble said at a meeting of EU finance chiefs in Luxembourg this week. “We have to adhere to the rules of the European treaties. They are tight, which is why we support, in a second step, a defined treaty change, but until then we’ll have to find solutions within the current treaties. I hope that everyone is prepared to reach a solution as soon as possible.”
Wolf Klinz, a German member of the parliament’s Committee on Economic and Monetary Affairs, said “any roadblock” in talks on the proposal would jeopardise the bill’s passage by the current parliament. “I’m not saying that it can’t be done before the elections", Klinz said. “It can be done if everybody is serious and committed. It’s going to be tough. It is an extremely ambitious timetable", he said. “If we can’t finish it by round the end of March to mid-April then the thing is gone, and we lose half a year", Klinz said.
Once the parliament and national governments have both agreed on their negotiating positions, then talks can begin on the final version of the plan. “Delays are not welcome in these circumstances because there is a global coherence” between “the different elements of the Banking Union project", Ferreira said. “If some of the elements are lacking, then the whole system is put in jeopardy.”
Open to compromise
Commission Barnier said he was open to compromise on plans for winding down stricken euro area banks, in a bid to overcome German-led attacks on the proposal. “What matters is that the system chosen functions effectively and will be workable", Barnier told reporters in London.
Areas open for discussion include the role the European Commission should play in the system, safeguards for non-euro nations that choose to participate and guarantees that governments won’t be railroaded into decisions that affect their public finances, Barnier said.
An accord between governments by year-end is “difficult and possible", Barnier said. While changes can be made to the proposals, the scope of the system shouldn’t be limited only to the biggest lenders, Barnier said. “The cases in which resolution may be necessary are not necessarily the biggest banks. If, for example, you were just to deal with big cross-border banks, you wouldn’t have necessarily included in your scope Dexia or Bankia", he said, in reference to two bank failures in the bloc since the eruption of the financial crisis.