24th Mar 2018

ESM bank bailouts will not happen soon, says Schaeuble

  • Schaeuble - No ESM bank bailouts any time soon (Photo: World Economic Forum)

German finance minister Wolfgang Schaeuble Monday (3 December) reiterated that no bank recapitalisation could take place until the EU's planned banking union is up and running.

The move deals a blow to ailing banks hoping for swift capital injections from the European Stability Mechanism.

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Schaeuble was appearing alongside French Finance minister Pierre Moscovici at a hearing of the European Parliament's Economic and Monetary Affairs committee.

He said that "recapitalisation of banks by the ESM will not happen next week and is unlikely to happen soon", adding that hopes that banks would have immediate access to emergency funding were "exaggerated expectations".

Schaeuble was also at pains to stress that any bank bailouts would be accompanied by strict conditions and would have to be formally applied for by national governments. He also emphasised the need for strict separation between the ECB's new supervisory powers and its role in formulating monetary policy.

However, addressing questions by Spanish centre-right deputy Pablo Zalba Bidegain, he acknowledged that "Spain can't wait that long".

Earlier the Spanish government submitted a formal request for €39.5 billion of emergency funding to prop up its stricken banking sector. Ireland is among the member states most anxious for the ESM to provide support for Anglo-Irish and the Bank of Ireland, both of which had multi-billion euro losses

The €500 billion permanent bailout fund came into force in September, and will replace the Luxembourg-based European Financial Stability Facility (EFSF).

EU finance ministers are meeting in Brussels on Tuesday to discuss proposals to establish a eurozone banking union. The draft legislation would establish the European Central Bank as a single supervisor of the eurozone banking sector, and is expected to come into force in 2013, with EU leaders recently agreeing that the legal framework should be in place by the end of 2012.

Formal negotiations between ministers and MEPs are also set to begin in the coming days after the Economic committee agreed its position on the package last week.

Schaeuble's remarks are the latest attempts by the German government to downplay the possibility of widespread bank bailouts from the ESM. Berlin is also anxious to ensure that its regional Ländesbanks are kept out of the scope of supervision.

Meanwhile, Moscovici called for new political structures, and possible treaty change, for the eurozone. "We need to look at the role of the executive in the eurozone and a eurozone minister", he said, while also mooting the possibility of creating a committee of MEPs charged with dealing solely with the single currency area.

MEPs expressed concern that further integration of the 17 eurozone countries with banking union risks the fragmentation of banking supervision and of the single market.

However, Schaeuble said that the best way to ensure "fair treatment in banking supervision" was for the ten non-euro countries to participate in the banking union.

Ministers at odds on banking supervision

Ministers remained at odds on how to include non-euro countries in a planned banking supervision scheme, threatening a 1 January deadline.

EU rejects US trade 'gun to the head'

EU leaders demanded a permanent exemption from US tariffs on steel and aluminium - and ruled out any bilateral trade talks within the 1 May deadline set by Donald Trump.

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