Whenever anyone refers to the eurozone’s financial system, it’s 17 supervisors, 17 deposit guarantee funds and 17 different banking systems they are talking about, really. And all 17 have suffered an unprecedented convulsion during the last five years. And things cannot go on unchallenged. That was the main reason for the agreement by the heads of state of the European Union last June 2012 to create a Banking Union, the project for a single regulatory framework led by the European Central Bank that still today, almost a year after its announcement, has seen little progress.
The cause for this delay is Germany, while its victims clearly are countries like Spain, which pays a steep overprice to access market credit. The mechanism of transmission of the ECB’s monetary policy has stopped working. For countries in northern and Central Europe, market financing is very cheap, whereas peripheral states must offer investors interest rates of 4 percent and 5 percent to place their sovereign bonds, in spite of years of budget constrictions, restructurings and public spending cuts.
The day will come when we’ll need to calculate the costs of having Chancellor Angela Merkel re-elected, and having her making decisions about the European Union as though only Berlin deserved to be heard and obeyed.
A Banking Union is urgent, and reasonable, and the right solution for some of the most destabilising problems we face. The International Monetary Fund said it should already be set up, the G20 and the president of the European Commission have said as much, too. The Spanish minister for the Economy, Luis de Guindos, explained that the Banking Union will take down one of the main barriers for peripheral economies to return to growth. But Berlin won’t listen.
In fact, Wolfgang Schaeuble, Germany’s Finance minister, has brought on to the negotiation table one more excuse to halt the process of the Banking Union. Schaeuble has warned it would require to amend the Lisbon Treaty because we’ll need common rules to close banks in trouble. This is a clever way to say ‘nein’ to the Banking Union, to prevent the eurozone bailout fund to inject capital directly into weak financial entities, and to avoid taking responsibility for the risks the German banks took lending to others.
The Banking Union is one more fundamental step in the construction of the United States of Europe. It would force every state member to accept the control by the Commission over fiscal policies and national budgets. Brussels could then order budget adjustments and even recommend a rescue to keep the eurozone in safe economic territory. Further down the line, we would also reach an integrated management of eurozone sovereign debt and, of course, Eurobonds.
Yet, it won’t happen unless Germany changes its mind, so far focused on austerity-only arguments to exit the crisis.