Banking union proposals on table “by autumn” - Barroso
By Sarah Collins | Wednesday 13 June 2012
Proposals on a banking union - including a common bank supervisor and joint deposit guarantee and resolution funds - could be on the table after the summer, European Commission President José Manuel Barroso has said. Speaking to MEPs in Strasbourg, on 13 June, he said that a banking union would have to be backed by a further strengthening of economic and fiscal policy, including stronger bailout funds, jointly issued debt and more tax and budgetary coordination.
“Financial integration is one area where major progress could quickly be made, even without treaty changes. Thus, the creation of a banking union appears as a natural priority,” he said. “By autumn, the Commission could be ready to come up with key proposals to introduce more integrated banking supervision and common deposit guarantee and resolution funds.”
Internal Market Commissioner Michel Barnier published proposals on bank recovery and resolution - COM(2012)280/3 - on 6 June that include a provision for national resolution funds to borrow from each other, a first step towards mutualising banking bailouts. But the same proposal was defeated when it was suggested for deposit guarantee schemes under a separate draft directive - COM(2010)368 - which has now gone into second reading stage because of deep divisions between Parliament and Council.
Barroso is drawing up a joint report on future eurozone integration with European Central Bank chief Mario Draghi, Eurogroup President Jean-Claude Juncker and the head of the European Council, Herman Van Rompuy, which they are due to present to EU leaders at a summit, on 28-29 June. At the summit, EU leaders are also due to agree a ‘growth pact’, demanded by new French President Francois Hollande to counterbalance the budgetary discipline enshrined in the recently signed ‘fiscal compact’. The Commission has said it could include the redistribution of any remaining EU Structural Funds to needy countries, a capital boost of at least €10 billion for the European Investment Bank and the launch of project bonds to fund infrastructure investment across the EU.
But rival plans are also being drawn up. According to a well-placed source, Germany’s plan for a ‘growth compact’ mirrors the Commission’s own, while Irish Taoiseach Enda Kenny has written to EU leaders to press for a “pan-European political solution” to the banking crisis that would avoid taxpayers standing behind bank debts in future. Italy’s Mario Monti, meanwhile, has suggested excluding public investments from statistical calculations of national debt and deficits, an approach that has been twice defeated in the European Parliament.
Economic Affairs Commissioner Olli Rehn has thrown his weight behind a proposal for the eurozone’s future rescue fund - the European Stability Mechanism - to be able to recapitalise banks directly, a move that he says would avoid one country’s taxpayers having to shoulder the debt burden of its ailing banks. Barroso said, on 13 June, that leaders should “further refine” the ESM - as well as the EU budget-backed European Financial Stabilisation Mechanism and the temporary European Financial Stability Facility - to “strengthen our potential to intervene in support of financial stability”.
MEPs, meanwhile, are urging the Commission to come forward with a legislative proposal on eurobonds, or as a first step, a “debt redemption” fund that would take over debt servicing for heavily indebted states. “What we need now are legislative proposals from your side directly put on the table of the Council and the Parliament on a fiscal union,” said ALDE leader Guy Verhofstadt (Belgium). “There is no need to wait for an agreement from France and Germany and Italy and Spain.”
EPP leader Joseph Daul (France) said it was “time that the European Council cuts to the heart of the matter, instead of making do with rescue measures and resources that are immediately surpassed by events”. “We must take the bull by the horns and decide, once and for all, what kind of European Union, what social model we want,” he said.
However, Barroso said that eurobonds - or ‘stability bonds’ as they were termed in last November’s Commission green paper - would be impossible without further budgetary discipline.