|
|
Now the two sides have drifted apart again over the details of the eurozone's proposed new banking union, with Berlin once again cast in the role of bad guy, frustrating the deeper integration needed to end the crisis.
Both agree on the necessity of a banking union to rebuild the eurozone's fragmented banking market, thereby allowing capital and liquidity once again to flow freely across borders. Both agree on the need for a Single Supervisory Mechanism, or SSM, the official name for the single regulator that is to be based at the ECB. Both agree that this regulator should be bound by a single European rule book to ensure consistency.
What separates the two sides is who will oversee the process of "resolving" failed banks. The ECB's view is that the key decisions over how to recapitalise or wind up a failed bank should be taken by the proposed Single Resolution Authority, or SRA, with strong powers of intervention and backed by a single resolution fund with a common fiscal backstop. Berlin's view, set out by Finance Minister Wolfgang Schäuble, is that decisions over how to resolve banks deemed undercapitalised by the new regulator at the ECB should be taken for the time being by national authorities, backed by existing eurozone fiscal arrangements.
One of the ECB's concerns is that without a common fiscal backstop, it will come under pressure to water down its asset-quality review to avoid tipping countries with weak banking systems and strained public finances deeper into crisis. At the same time, it is rightly wary of relying on national authorities that have failed to clean up their banking systems for the last three years. Without an independent resolution authority, the ECB fears it would become mired in destabilising standoffs with national authorities that would risk spillovers across the eurozone.