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The single resolution mechanism agreement is said to be crucial to the continuing stability of the euro, but no-one would guess that from the way that it has been bodged together. Still, for all the SRM’s faults, the European Parliament was right to not examine the joins too closely and let this through.
The first question about the SRM is what, in practice, it actually changes. The European Commission already controls bank resolution if any state aid is involved. That function will continue indefinitely although the SRM comes into force on 1 January, 2015. The resolution funds will be built up to €55 billion over some years which, again, may not really move the needle should a big bank fail.
What is clear is that the complexity of the proposals, and the rushed legislation, were a bad way to make law. However, an agreement was reached and the scheduled review in 2016 can sweep up any nasty failings that do come to light in the interim.
How messy was it? German Finance Minister Wolfgang Schäuble reportedly said: “I can say the European Parliament has to make a lot of moves, otherwise we will not get a decision …and then we will have no regulation”. The Germans wanted European finance ministers to have more say in the resolution process and to minimise the cost of the fund. The European Parliament disagreed. At the same time, the imminent dissolution of the European Parliament before the elections in May was ratcheting up the pressure. That the deal was, in the end, done came down to several major factors.
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