EU leaders push banking union despite German reluctance
By Jan Strupczewski
BRUSSELS (Reuters) - European Union leaders said on Friday they want agreement by the end of the year on a way to resolve failed banks at European rather than a national level, signaling work should go on despite German objections ahead of elections in September.
German Chancellor Angela Merkel cast doubt on whether that timetable could be respected, saying the creation of a European authority with such powers would require a change to the EU treaty - a lengthy and politically risky process.
EU finance ministers agreed on Thursday on an intermediate step towards what is known as European banking union, which involves tighter oversight of banks and coordinated resolution of any problems. Under the deal, investors and wealthy savers will share the costs of future bank failures before taxpayers.
That moves the EU closer to drawing a line under years of taxpayer-funded bailouts that have caused public outrage.
But the law only sets common rules that national authorities in the 27-nation bloc have to follow when dealing with their own banks. It does not allow for sharing power or the financial costs of closing down or rescuing banks at EU level.
It is only a stepping stone to creating a central EU body to deal with failing banks, including big financial institutions that operate across national borders.
The European Commission, the EU's executive arm, is to propose how to create such a central agency, called the Single Resolution Mechanism (SRM), in July, although some officials indicate that it could be delayed beyond that date.
Merkel insisted that setting up a central authority with powers to close down banks in euro zone countries would require changing the EU's treaty, or else it could be challenged in Germany's constitutional court. Continued...