The Banking Union was heralded just before the summer break as a safe harbour for the financial system. It was also seen as a powerful firewall preventing potential solvency upheavals from putting the Euro at risk. A too good solution that admittedly deceived the penchant for trouble the EU seems so fond of. But no sooner the alarm bells ceased tolling, EU partners started raising hurdles in a desperate attempt to block this sound initiative.
The German-led bloc first objected to hand over supervision for all banking institutions to the European Central Bank, then turned into filibustering tactics to delay its full implementation. Fears that the plan might derail were largely dispelled as the last Summit struck a fair and balanced deal. It set a tight deadline for enforcing the rules, thus preserving the momentum for the Banking Union initiative, while allowing generous extra time for its effective running.
But now Berlin insists on enhancing its voting powers within the ECB claiming it risks footing the bill should any sizeable restructuring materialize. A most delicate issue that will likely spark bitter reactions, not to mention its potential to push the deadline well beyond the scheduled time.
Non Euro members are also contributing to entangle discussions by first insisting on reaping the benefits of common supervision and then objecting to playing a subdued role in the decision-making procedure. Following the common sense proposal, they would sit together with other Euro members in the supervisory body but the ultimate say would rest with the ECB Board. An exclusive club barred to non-Euro members, as one might imagine.
Sweden denounces a fundamental breach in equal treatment, pressing for a change in Treaty rules. A move that could send the Banking Union drifting into a limbo for a long period. Poland and other Eastern countries are asking for opt-outs in case the Board does not follow to the line the supervisory body recommendations. And UK is adamantly urging the EBA to take on board a number of key supervisory responsibilities thus undermining the ECB powers.
In trying to solve these last minute demands the Cyprus presidency is dangerously fuelling a flawed debate that risks jeopardising the whole initiative. EU has once and again proved it can only curb its dwarfing tendency when confronted to emergency situations. Let’s hope the row over the Banking Union governance is settled well before we face a full-fledge crisis.