It's been proposed that the European Commission get the power to shut down an ailing European bank. But for the government in Berlin, transferring these powers to Brussels is out of the question.
In the future, the European Union plans to spare the taxpayer from the responsibility of saving failing banks in the eurozone. To do so, a common European banking supervisory body has been set up at the European Central Bank (ECB), and is expected to be operational within a year.
A few weeks ago, EU countries also agreed on who should pay first if a bank goes bankrupt, deciding to initially put large shareholders on the line. Now, the commission has proposed a European resolution authority that would be able to centrally order the closure of a bank if it can no longer be saved. For this purpose, banks would have to contribute to a common fund amounting to 60 or 70 billion euros (up to $89 billion) after a decade, according to Michel Barnier, the commissioner in charge of financial regulation.
To date, the rescue, supervision and the closure of banks has been a matter for individual EU states - a setup that has brought states like Ireland and Cyprus, along with their citizens, to the brink of the bankruptcy abyss. At the same time, another prevailing view is that European rescue measures are holding taxpayers in other EU states have hostage. The new EU resolution authority would put an end to all this.
Commission wants to 'press the button'
"Banks are increasingly developing ... more transnational activities, while supervisory and resolution authorities remain national. It can't go on like this," said Barnier on Wednesday (10.07.2013).
Barnier imagined the future as follows: a council of representatives from member states, the commission and the ECB would make proposals for resolutions. The commission would then, in coordination with national supervisors, "press the button," as he put it.
Barnier said the Commission is best suited for this role "because of its expertise and ability to quickly decide to put the resolution in motion." But a transfer of such powers to Brussels, with the scope and the sums involved, has been met with resistance - especially from the German federal government in Berlin.
German Finance Minister Wolfgang Schäuble said Tuesday (09.07.2013) that there was a lacking legal basis for Barnier's proposal. "[Such a proposal] could only be the responsibility of the national resolution authorities, and must be coordinated at the European level," he said at a meeting of finance ministers. Those who want more integration should advocate for change in the European treaties, he added.
In the European Parliament, which would also have to approve such a decision, Christian Social Union member Markus Ferber echoed Schäuble view, saying "it would not be politically justified for the final decision on a bank bailout or resolution to rest with the European Commission, which would involve funds from national taxpayers."
The proposal would also likely fail if it went up to Germany's Federal Constitutional Court, with Ferber's colleague Herbert Reul even calling Barnier's idea "an unnecessary provocation."
Decisions needed on weekends
On the other side are the Free Democratic Party and the Greens in the EU Parliament. The grouping's leader, Guy Verhofstadt, has backed the "community method" and wrote in a statement: "As the crisis has taught us, this new system must be centralized if we want to avoid a delayed and one-sided decision. This would only lead to further costly bank bailouts."
Sven Giegold, financial spokesman for the Green Party, has accused the German government of "hiding behind flimsy pretexts and legal risks in order to force the European banking union to die a pitiful, expensive death." Speaking with DW, Giegold brought up practical objections to Schäuble's proposal of a European network of national resolution authorities.
"Networks are complicated, with daylong sessions until they come to an agreement. It's not clear who would ultimately make the binding decision," he said. Questions concerning bank bailouts and resolutions often need to be decided over the weekend, before markets are able to react. Therefore, speed is of the essence.
So far, Barnier's proposal is merely a suggestion. But by the end of the year, after negotiations with the European Council and European Parliament, he will seek a consensus.
Debate is likely to be fierce. Added to it is discussion about the third pillar of the planned banking union, beyond the centralized banking oversight and a central banking authority: a jointly guaranteed deposit insurer. This last is guaranteed to be just as controversial as Barnier's general proposal.
For the most part, Germany and other countries with solid finances are against the proposal, while the commission and weak eurozone states are for it.
In any case, it all ultimately comes down to the same thing: the federal government is concerned that Germany should be responsible for the errors and mismanagement of others. The other side argues that solidarity would ultimately be profitable for all and make Europe stronger. The debate is likely to continue for quite some time.