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13th Apr 2024

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This WEEK: bank union to dominate EU summit

  • ECB: the banking union will dominate next week's EU summit (Photo: Valentina Pop)

EU leaders will descend on Brussels on Thursday (19 October) for a summit expected to be dominated by talks on the proposed EU banking union, as well as the growth and jobs pact agreed at the June summit.

In September, EU commission President Jose Manuel Barroso unveiled ambitious plans to establish the Frankfurt-based European Central Bank (ECB) as the single supervisor for the eurozone banking sector. The move was hailed by the markets as a sign that leaders were ready to break the link between indebted banks and sovereigns.

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Although some are anxious to force the package into law before the end of 2012 in time for the ECB to assume supervisory authority over the eurozone's biggest banks, others, led by Germany, are unhappy with the plans.

Wolfgang Schauble, Germany's finance minister, has repeatedly warned that sweeping supervisory powers would cause conflicts of interest with the ECB's existing tasks. Under the EU treaties, the primary role of the bank is to use monetary and interest rate policy to "maintain price stability."

Other financial actors are growing frustrated with the EU's apparent inability to act decisively on the euro's future.

Ahead of its annual meeting with the World Bank, Jose Vinals, the head of the IMF's monetary and capital markets department, insisted that "a clear roadmap on a banking union and fiscal integration are needed to restore confidence, reverse the capital flight and reintegrate the euro area."

Meanwhile, MEPs reacted cautiously to the plans. Although a majority of deputies in the EU assembly back the concept of banking union, there is widespread concern that about the potential lack of parliamentary scrutiny over the ECB's new role.

Meanwhile, EU Council President Herman Van Rompuy's "ideas paper" on deeper eurozone integration will also provide food for thought.

Treasury bills to replace short-term debt, a special budget and a finance ministry were the three main proposals offered by Van Rompuy, who also repeated the possibility of a temporary "redemption fund" being set up to pool and gradually pay off eurozone debt above the 60 percent stability and growth pact threshold.

Elsewhere, EU foreign ministers will meet on Monday (15 October) to discuss sanctions against Iran, Syria and Belarus.

Over 200 Belarusian government officials, including President Lukashenka, are currently subject to an EU travel ban and asset freeze, sanctions which ministers are expected to extend until November 2013.

Foreign affairs chief Catherine Ashton described the elections as "yet another missed opportunity to conduct elections in line with international standards in Belarus" adding that voting had taken place against the backdrop of "an overall climate of repression and intimidation."

Ministers are also expected to discuss what support the EU can offer to the Malian security and defence services, as the West African country remains wracked by civil war. EU aid to Mali has been on hold since a military coup d'etat in March. An estimated 450,000 people have been displaced since the start of 2012.

Italian Prime Minister Mario Monti will be in town on Monday (15 October), with the former commissioner appearing alongside Barroso as the European Parliament hosts a press seminar to mark the 20th anniversary of the EU Single Market.

On Wednesday, the commission will propose new rules on biofuels to reduce greenhouse gas emissions compared to petrol or diesel. MEPs are anxious that EU legislation should only promote emissions-reducing biofuels.

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