European lawmakers warn of banking union split

Wed Sep 26, 2012 7:24am EDT
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By John O'Donnell

BRUSSELS (Reuters) - Creation of a banking union to help resolve the euro zone debt crisis could lead to a split within the wider European Union, lawmakers in the European Parliament warned during a debate that laid bare the extent of tensions in the bloc.

Brussels proposed earlier this month that the European Central Bank (ECB) take charge of supervising all banks in the euro currency zone, as a first step towards creating a banking union under which euro zone countries would eventually jointly back their lenders.

However, the plan has sparked concerns among the 10 EU countries which do not use the euro that they will be indirectly affected by the ECB's new supervisory powers and put at a competitive disadvantage, whether they join the scheme or not.

Legally, the European Parliament will have no say in writing much of the legislation for a banking union. But it has powers to amend other important financial regulations and can exert influence to change or even delay the new regime.

"What's the point of having a single supervisory mechanism (for the euro zone) when you have the UK with its 60 percent of the financial market not involved?" said Werner Langen, a German lawmaker, in the debate on Wednesday.

"Instead of a single supervisory mechanism, we have a division of Europe, a very explosive division."

Langen's views were echoed throughout the debate of the parliament's influential economic and monetary affairs committee, where members from around Europe voiced conflicting views about the shape of a banking union.

"What we don't want to do here is split the EU down the middle," said Wolf Klinz, a German member of parliament. "What we don't want to see is that the British push themselves into a corner where they have a referendum and they say ... that's enough for us."   Continued...

A Euro currency sign is seen in front of the European Central Bank (ECB) headquarters in Frankfurt September 6, 2012. REUTERS/Alex Domanski