Tuesday

22nd Aug 2017

Spain may speed up EU 'banking union'

  • EU politicians have been making increasingly gloomy statements about the eurozone (Photo: David Dennis)

The US has joined ranks with EU officials exploring ways to pump eurozone money directly into Spain's troubled banks instead of having to further burden the state budget.

"We were talking about the possibility that the banks, not only Spain's but also in other countries who need it, could access funds directly without intervention from the governments and without conditions," said Spanish deputy PM Soraya Saenz de Santamaria after meeting US finance minister Timothy Geithner in Washington on Thursday (31 May).

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

"The treasury secretary indicated that we are working in the same direction and that we must find a solution for the banks," she added.

Meanwhile, an International Monetary Fund official at a conference in Brussels on Thursday also pressed for "decisive steps" in what is now generically being called a "banking union."

"Such steps would involve providing banking support from a common resource pool independent from national sources, sooner rather than later," IMF deputy chief Nemat Shafik said, a month before an EU summit where leaders are set to discuss the way forward for the eurozone, including the possibility of a banking union.

European Central Bank (ECB) chief Mario Draghi, one of the architects of the eurozone plan, on Thursday told EU parliamentarians in Brussels that the euro set-up in its current form was "unsustainable."

"The next step ... is to clarify what is the vision a certain number of years from now. The sooner this is specified, the better it is."

In Draghi's view, a banking union would need to be supervised centrally, guarantee deposits for the banks' customers and set up a joint bail-out fund banks would contribute to.

Draghi also criticised the handling of Bankia, a major Spanish bank bailed-out by the state, whose total bill is still unclear after having been revised several times.

"There is a first assessment, then a second, a third, a fourth,” Draghi said. "This is the worst possible way of doing things. Everyone ends up doing the right thing, but at the highest cost."

A similar sense of urgency in reforming the eurozone architecture was given by Italy's central bank governor, Ignazio Visco, who that same day in Rome said: "There are now growing doubts among international investors about governments' cohesion in guiding the reform of European governance and even their ability to ensure the survival of the single currency."

Italy, as well as Spain, has seen its borrowing costs rise not only due to national economic problems, but also due to market fears that Greece may leave the eurozone.

Italian Prime Minister Mario Monti on Thursday urged Germany to reconsider its opposition to having common defences in order to shield Italy and Spain from contagion, while EU economics commissioner Olli Rehn called for "a much upgraded common capacity to contain common contagion."

Germany's fears of increased inflation were undermined by the latest eurozone statistics, which showed that inflation decreased to 2.4 percent in May from 2.6 percent in April on average in the euro area.

In Germany, inflation fell even more - to 1.9 percent in May compared to 2.1 percent the month before. The ECB's target is to keep inflation around 2 percent.

Agenda

This WEEK in the European Union

Proposals for a banking union and the return of Russia's Vladimir Putin to high office will dominate next week's EU agenda.

Brussels: 'Banks should pay for banks'

The EU commission has unveiled proposals to change the too-big-to-fail rationale that has seen billions of euros of public money pumped into ailing banks.

EU cautious with German diesel plan

The European Commission welcomed the German carmakers' pledge to update software in diesel cars, but is waiting for details on how emissions will be reduced.

News in Brief

  1. Austria has begun checks at Italian border
  2. Slovenian PM: Brexit talks will take longer than expected
  3. Merkel backs diesel while report warns of economic harm
  4. UK to publish new Brexit papers this week
  5. Macedonia sacks top prosecutor over wiretap scandal
  6. ECB concerned stronger euro could derail economic recovery
  7. Mixed Irish reactions to post-Brexit border proposal
  8. European Union returns to 2 percent growth

Stakeholders' Highlights

  1. European Jewish CongressEuropean Governments Must Take Stronger Action Against Terrorism
  2. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  3. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  4. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  5. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  6. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  7. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  8. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  9. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  10. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  11. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  12. ACCAAnnounces Belt & Road Research at Shanghai Conference