Eurozone bank deal: Group edges towards union

 
A protester holds a life saver in front of a bank in Madrid. Photo: June 2012 Bankia HQ, Madrid: Will the ECB be a lifeline for struggling eurozone banks?

In the middle of the night, Europe's finance ministers took another major step towards closer integration. They agreed to set up a single supervisor for the eurozone's banks.

From 2014, the European Central Bank (ECB) will be directly supervising around 200 of the largest banks - but will have the right to intervene if smaller lenders are in trouble.

The ECB will have sweeping new powers and ultimately it will allow the EU's main rescue fund to channel aid directly to struggling banks.

For countries like Spain this could prove a significant lifeline. For these measures are not just about oversight, they are about breaking the loop where the failures of banks ended up on the books of governments so increasing national debt.

This deal represents another significant transfer of authority away from national governments to a European institution.

'Sad day'

It is yet a further example of how the eurozone crisis is carving out a new Europe less from choice but more by the need to survive.

The direction of travel is causing unease - and not just in Britain.

Swedish Finance Minister Anders Borg said that approval of a banking union would mark "a sad day for Europe".

His country is not joining the banking union, but Mr Borg said that "there is a move now towards eurobanks, eurotaxes, eurotransfers... We think these are steps in the wrong direction.

"It might be very popular among the eurocrats, but I think there are very few Europeans actually wanting these developments."

German Finance Minister Wolfgang Schaeuble, however, said that "painstakingly we advance the cause of Europe".

So, when Europe's leaders gather in Brussels they will be examining a "blueprint" for building what is called "genuine" economic and monetary union.

So, down the road - and probably not too far ahead - the European Union will seek closer co-ordination of national budgets and economies, how to enforce reforms and how to fund and wind down failing banks.

Britain's challenge

The wider ambitions for all this were set out by the President of the European Commission, Jose Manuel Barroso.

He sees the summit as signalling yet again the "irreversibility" of the euro and economic and monetary union.

Achieving that, he insists, will require "steps towards a political union".

As British Prime Minister David Cameron prepares for his major speech on Europe - almost certainly now in the New Year - this is the reality he must confront.

In order to save the single currency, Europe has signed up to much closer union. The landscape has been changed and will change further.

The challenge for Britain is to retain its influence in a union where the core is bent on closer integration.

Cycle of decline
An elderly woman walks past an ATM machine in Athens. Photo: May 2012 There are fears of more social unrest in 2013 in the worst-affected EU countries

Europe's leaders may well allow themselves some end-of-year satisfaction. The markets are certainly calmer than they were. That is almost entirely due to the "Draghi effect."

In September, the ECB president Mario Draghi said he would do whatever it takes to protect the euro, and investors have chosen not to bet against the ECB.

Away from the markets there has been some real progress: Labour costs have been reduced; competitiveness enhanced and deficits trimmed.

However, Europe edges towards the close of a year with many countries in recession, with unemployment increasing and debt mountains still edging higher.

Some countries seem trapped in a cycle of decline, and 2013 promises to be a difficult year.

Privately, Europe's leaders fear social unrest as many of the austerity measures are implemented at a time of recession.

They believe we are entering the dangerous period - the time between now and when some of the reforms start boosting growth.

There are other reasons that might temper seasonal cheer: Italy faces a period of political uncertainty and sooner or later the German taxpayers will have to be told that Greek debt is unsustainable and that they will have to take losses on the loans they made.

The eurozone crisis will be with Europe for some time yet.

 
Gavin Hewitt, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    +1

    Comment number 98.

    Unlike northern European countries, Britain has never been an ´inclusive´ society for its citizens. Those countries are always considering ways how to increase their living standard for all.

    Britain is still in a (Feudal) ´mental straightjacket´ of ´them and us´ and cannot change.

    There is a difference between ´Sovereignty´ used to defend wealth or used to defend poverty as with the UK.

  • rate this
    +1

    Comment number 97.

    93 DavidUS

    "France overspends"

    US debt is 35% higher than that of Greece !

    USA debt amounts to 40 000 euros per person compared to EU debt of 21 000 euros per person.

    What seems to rile many Americans is that our countries looks after their citizens health and well being unlike the US which prefers to spend your taxes on foreign wars and empire building.

    It will all end in tears

  • rate this
    0

    Comment number 96.

    "Eurozone bank deal: Group edges towards union"

    I like the words, but prefer a different order:

    "Eurozone bank deal: Union groups towards edge."

    Well, it is easy t be flippant. The folks we are talking about have a track record of absurd proclamations followed by more actual crisis due to debts of vast magnitudes.

    What has changed? Less debt? No, there is more, in fact.

    Words and debt = EU.

  • rate this
    -1

    Comment number 95.

    93. DavidinUSA

    May be the honest actual EU guiding principal is, Keep your friends close, and your enemies closer still.

    If progress is made on the UK allowing it looser ties with the EU.All opposition,from the threat of import barriers to increased bureaucracy, you can bet your boots it will originate from France.




    Ps loss of 28 at school today,inadequate I know,I`m so sorry & upset.

  • rate this
    -1

    Comment number 94.

    93.DavidinUSA

    France ... Why do we allow it to set the tone for the EU?


    EUp: You are quite right on that point. But rather than stay in the "EU" and fight its stupidities and dictatorship the UK should just leave. Then we should not have a Swiss/Norwegian relationship with the "EU". We need to be TOTALLY free of that rubbish.

  • rate this
    0

    Comment number 93.

    The old continent's slide back into poverty and violence again highlights Greece, Spain, Ireland & Portugal. True, these are basket cases but underpinning all this is France, the true rotten heart of the EU.

    France overspends; has an obscenely big public sector; ethnic tensions; & destroys wealth. But why should it drag the EU with it? Why do we allow it to set the tone for the EU?

  • rate this
    0

    Comment number 92.

    http://www.bbc.co.uk/news/business-20679152

    "The cost to Ireland of rescuing its banks was so great that the Dublin government then had to seek a bailout of its own from other European governments and the International Monetary Fund"

    EUp: I have seen nothing to persuade me that they HAD TO bail out the banks rather than let them go bankrupt

    So as far as I can see they are useless!

    !

  • rate this
    0

    Comment number 91.

    @69 quietoaktree
    this video is very interesting
    "Bernard A. Lietaer on Monetary blind spots and structural solutions 3v5" about the monetary system, the Chartalist school and the Modern Money Theory.

    full employment + price stability is possible if the Government issues the money, but the defenders of the status quo make sure that none can never hear of MMT.

  • rate this
    -2

    Comment number 90.

    "Eurozone bank deal: Group edges towards union"

    Simultaneous insolvency. 'O they'll all go together when they go!

    They've been at this for years. Things aren't getting better, they're getting worse. Just keep digging. Eventually you'll get to China or Australia and come out into the open fresh air.The light at the end of the tunnel is the headlamp of an oncoming train.

  • rate this
    -2

    Comment number 89.

    "Greece's unemployment rate rose to 24.8 % in third quarter. 62% have been out of work for more than a year"

    What will happen when it reaches 100%? What will happen when German voters pull the plug?

    A burning building with no exits.Makes for an amusing diversion if you have no part in it yourself.

  • rate this
    +2

    Comment number 88.

    82 Lucy

    "Americans became one nation because we wanted to,
    not because of money+not out of fear"

    So what was that terrible civil war all about barely 60 years after your foundation? I believe the old hurts still fester on both sides.

    If I were a betting person I wouldn't bet on who breaks up first - the USA or EU.

  • rate this
    -3

    Comment number 87.

    @ 84. EUprisoner209456731

    "Opponents of the EU are often accused of reading the Sun."

    In that case I'm a proud Sun reader.


    @ 85. democracythreat

    Speaking of Romania and Bulgaria, not looking forward to when we open our borders to them next December.

    There will be a massive jump in immigration again. I think the UK should have a one in one out policy. A bit like nightclubs when they're full.

  • rate this
    -1

    Comment number 86.

    One is tempted to compose a bedtime story about a bear and a lion who were told they may not enter the forest by a wolf and a boar, and by various species of rodents and reptiles that crawl and slither on the forest floor.

    Even without the historical precedent in allegory, one can't remain true to credible fiction, lest the wolf and boar come off second best. & the various species of rodents etc.

  • rate this
    -3

    Comment number 85.

    This talk about the UK blocking full European integration is a bit dramatic.

    There is Russia to consider. If St Petersburg is not a European city, then what is it? Then, west of Russia. Fisticuffs in the bankrupt Ukrainian parliament, and so forth. Romania, Bulgaria? Havens of economic virtue and progressive European values?

    The EU is unified as the crew of a ship are unified when it sinks.

  • rate this
    -2

    Comment number 84.

    60.Adam
    7 Hours ago
    @ 59. EUprisoner209456731

    What's the Sun got to do with it?

    EUp: Opponents of the "EU are often accused of reading the Sun. I even got accused of that on the Austrian Radio website. It was just a pre-emptive counter-strike.

  • rate this
    -3

    Comment number 83.

    @ 80. LucyJ

    "Its the last major roadblock standing in the way of full European integration"

    I agree.

    The euro has caused countries to collapse and through desperation and scaremongering they are now giving up their sovereignty.

    That's not the way to form a union that will last.

    http://item.liveleak.com/2/view?i=d51_1355330490

    I think he puts it better than I can

  • rate this
    -2

    Comment number 82.

    Bluesberry: I think we are moving towards a United States of Europe & I agree with this direction because it buttresses Euro

    So you want to give up your national soveriegnty for money?

    Funny how the Euro is more important than Europeans...

    Americans became one nation because we wanted to,
    not because of money+not out of fear

    So in that aspect we cannot really be compared

  • rate this
    +6

    Comment number 81.

    Deal represents another significant transfer of authority away from national govts to EU institution.
    So what?
    I think we are moving towards a United States of Europe & I agree with this direction because it buttresses Euro & enables joint financial action e.g. FTT (Financial Transaction Tax) to alleviate pressure from taxpayers & place it squarely where it should be - on banks.

  • rate this
    -4

    Comment number 80.

    Adam: To me it means we are more important to the eu than they are to us

    UK is the lone hold-out

    Its the last major roadblock standing in the way of full European integration

    There have been many people who have tried to rule over all of Europe
    for thousands of years
    but no one has ever accomplished that feat

    EU is closing in but there is one puzzle piece left,
    the UK

  • rate this
    -4

    Comment number 79.

    @ 76. quietoaktree

    "-- To put the UK´s failure at the feet of the EU is dishonest --the charts show otherwise."

    Why do you think the UK is a failure? Just because a nation imports more than it exports doesn't make this so.

    To me it means we are more important to the eu than they are to us.

    If we left without our contributions their house of cards would come down a lot quicker

 

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