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EU leaders have agreed funds set up to bail out indebted governments could be allowed to funnel money directly to ailing banks, rather than via governments, increasing their debt burden, once an effective central bank supervision system is established.
"I have my doubts that it will come so quickly, and so I think that once again expectations are being created here that can't be fulfilled, not even close", Schäuble said. "That is always a reason for trouble and nervousness in the financial markets."
Berlin and Brussels already appear at odds on the extent of the new supervisor's powers. Barnier has argued that all banks need to be supervised centrally by the European Central Bank; Germany argues that the supervisor should limit its focus to major banks whose stability is vital to Europe's financial security. Germany insists that, if the supervisory job is handed to the ECB, decision-making on banking supervision and monetary policy must be strictly separated.
Schäuble stressed that the [German] government respects the independence of the ECB and the Bundesbank. He cautioned against raising "wrong expectations" and expressed confidence that the ECB won't exceed its mandate.
"There must be no decisions -- we would consider them completely wrong, they would not be covered by the mandate of the European Central Bank, but the European Central Bank won't do that -- that would amount to government debt being financed through monetary policy", he said.