Germany puts the brakes on banking union

Published on 12 April 2013 at 14:41

The much longed for banking union, which Europe’s member states want to establish so as to avoid another sovereign debt crisis, will in all likelihood be subject to more delay caused by cold feet in Berlin. Citing sources at the European Commission, Expansión writes that “Germany has reopened discussions on the deal on the creation of single supervisory authority to be based at the ECB” concluded last March between the European Council, the European Commission and the European Parliament. The matter is expected to be raised at the Eurogroup and ECOFIN meeting in Dublin on April 12-13. According to the Spanish financial daily —

Berlin is worried that the final text does not clearly separate the monetary policy and financial supervision functions of the European Central Bank.

As it stands, the new regulations cannot be approved until they are put to vote in the European Parliament in May. The daily points out that this will in turn delay the direct recapitalisation of banks by the European Stability Mechanism (ESM), which is urgently needed by Madrid. Expansión further notes —

that parliamentary sources have expressed concern over this state of affairs, because the [German] initiative could encourage other countries to renegotiate other points in the text, which they believe to be controversial.

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