Europe's new banking plan gets cool German response
By Claire Davenport
STRASBOURG, France (Reuters) - The European Commission unveiled sweeping plans for the European Central Bank to supervise all euro zone banks on Wednesday, though Germany immediately raised objections that the proposals risked overstretching the ECB.
European Commission President Jose Manuel Barroso set out the proposals in a speech to the European Parliament, telling its members that giving the ECB responsibility for monitoring banks would be the first step towards creating a banking union for Europe.
The reforms, which need to be approved by the European Union's 27 member states, aim to break the link between struggling banks and heavily indebted governments, an interdependence that has exacerbated the debt crisis over the past three years.
By empowering the ECB to police all banks in the euro zone, the proposal hopes to break the vicious cycle and then lay the ground for deeper fiscal cooperation across the EU as the economic and monetary underpinnings of the union are strengthened.
"We need to move to common supervisory decisions, namely within the euro area," Barroso said in his speech, saying the ECB should take charge of all euro zone banks - by most estimates around 6,000 institutions.
Germany, which is keen to retain primary oversight for its regional savings and cooperative banks, had already questioned whether the ECB should spread itself so thinly and repeated its reservations immediately after Barroso's speech.
Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble said the ECB would be more effective in its oversight if it had responsibility only for the largest, systemically important banks in the euro zone, which number about 25-30.
"The quality and efficiency of the new supervisor must be the focus. Purely on practical terms it seems impossible for the ECB to monitor 6,000 banks appropriately," Schaeuble said in a statement. Continued...