German Finance Minister Wolfgang Schäuble has warned that rushing to establish a European banking union could backfire if existing treaties in the bloc were violated. He called for a two-step mechanism.
Wolfgang Schäuble told the Financial Times on Monday that creating a central authority to wind up failing banks in the 17-member eurozone and beyond should not be tackled before binding treaties were amended accordingly.
Seeing the urgency of the scheme to prevent taxpayers from bailing out lenders in the future, however, the minister hastened to add that Europe did not have to choose between a legally shaky authority now and delaying repair work.
He suggested a two-step roadmap, with a first measure aimed at creating a mechanism of national authorities and relying on national funds rather than making a central institution responsible for bank resolution.
Setting out how to shut failing lenders has been identified as an important factor that will help stabilizing the eurozone's financial system. Schäuble acknowledged that a mechanism based on the cooperation of national authorities could not last forever.
"But it would serve the purpose of winning time needed to put in place the legal base for a central bank resolution authority," he explained.
The banking union scheme acquired new urgency after a botched 10-billion-euro ($13 billion) Cyprus bailout in which angry account holders saw their deposits used to help pay for rescuing the country's two largest banks.
The European Central Bank expressed concern that keeping responsibility for closing institutions at the national level would undermine Frankfurt's ability to make independent judgments about their health.
hg/mkg (Reuters, AP)