Monday

23rd Jan 2017

Franco-German rift derails banking union deal

  • Bank building:finance ministers will attempt to reach a deal on banking union on the eve of the December summit (Photo: orkomedix)

EU finance ministers will return to Brussels on the eve of the December EU summit next week for last ditch talks on the controversial banking union proposals, after failing to reach agreement on Tuesday (4 December).

Speaking with reporters following the conclusion of talks, Vassos Shiarly, the Cypriot finance minister, said that agreement was very close. However, Articles 5, 19 and 27, which deal respectively with the role of national regulators, the composition and decision making processes for the new ECB supervisory board, and the timetable for implementing the rules, are still subject to further negotiation.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

Member state officials will continue negotiations in preparation for the return of ministers next week.

Meanwhile, Shiarly attempted to clarify the possible future role of the €500 billion European Stability Mechanism being able to directly prop up cash-strapped banks. "Once the single supervisory mechanism is up and running it will be possibly for the ESM to directly recapitalise banks", he said.

As expected, the question of the scope of the supervisory framework is at the centre of a Franco-German disagreement. France is keen for the entire 6,000 strong eurozone banking sector and for the legal framework to be rapidly implemented. Germany, meanwhile, is anxious to keep its regional savings banks outside the supervisory regime, with the ECB focusing only on overseeing the bloc's systemically important big banks.

Speaking during the public deliberations, German Finance Minister Wolfgang Schaeuble made a thinly veiled threat that his government would oppose full supervision. “It would be very difficult to get approval by the German parliament if (the deal) would leave the supervision for all the German banks to European banking supervision,” he said.

“Nobody believes that it would work,” Schaeuble added.

French Finance Minister Pierre Moscovici, meanwhile, spoke in favour of a banking union structure “that covers all banks, and that is under the final control of the ECB.”

“In the end it must be the ECB that has the responsibility on the whole. Otherwise, there is no real system of banking supervision,” he said.

The ten countries outside the eurozone are also coming under concerted pressure to sign up to the banking union reforms. The UK, in particular, is wary that being marginalised in decision-making could weaken the City of London's position as the preeminent financial centre in Europe.

Other countries, including Sweden and Denmark, worry that the ECB's governing council, which only includes central bankers from the 17 eurozone countries and the 6-man executive board, would shut them out of key financial sector decision making.

The UK's House of Lords EU committee is expected to warn that a fragmented implementation of banking supervision rules could "threaten the integrity" of the single market in its report on the implications of the new supervisory regime.

Finance ministers will reconvene in Brussels next Wednesday (12 December) and attempt to tie up the remainder of the the legislation.

With ministers unable to agree on a negotiating mandate, the prospect of the two files being passed before the end of 2012 has dimmed. Even if ministers can agree a mandate before the summit, it will not be possible to conclude a deal with MEPs in the European Parliament before the Christmas break.

A parliament vote on the proposals had been pencilled in for next week's plenary session in Strasbourg but will not take place making the January session the next window of opportunity.

Trump pledges US-first foreign policy

Economic protectionism and war on Islamist terrorism will form the heart of US foreign policy, Trump has said. He did not rubbish Nato, but indicated interest in a new Russia alliance.

GMO opt-out plan remains in waiting room

The commission wants to give the power to member states to reject EU-approved genetically modified organisms, but the Maltese presidency is unlikely to approach the issue any time soon.

Stakeholders' Highlights

  1. Caritas EuropaEU States to Join Pope Francis’s Appeal to Care for Migrant Children
  2. UNICEFNumber of Unaccompanied Children Arriving by sea to Italy Doubles in 2016
  3. Nordic Council of Ministers"Nordic Matters" Help Forge Closer Bonds Between the UK and the Nordic Region
  4. Computers, Privacy & Data ProtectionThe age of Intelligent Machines: join the Conference on 25-27 January 2017
  5. Martens CentreNo Better way to Lift Your Monday Blues Than to Gloss Over our Political Cartoons
  6. Dialogue PlatformThe Gulen Movement: An Islamic Response to Terror as a Global Challenge
  7. European Free AllianceMinority Rights and Autonomy are a European Normality
  8. Swedish EnterprisesHow to Create EU Competitiveness Post-Brexit? Seminar on January 24th
  9. European Jewish CongressSchulz to be Awarded the European Medal for Tolerance for his Stand Against Populism
  10. Nordic Council of Ministers"Adventures in Moominland" Kick Off Nordic Matters Festival in London
  11. PLATO15 Fully-Funded PhDs Across Europe on the Post-Crisis Legitimacy of the EU - Apply Now!
  12. Dialogue PlatformInterview: Fethullah Gulen Condemns Assassination of Russian Ambassador to Turkey