In their summit statement of 29 June, the heads of state and
government of the Eurozone issued a declaration widely interpreted by
investors as the founding act of a European banking union, about which
European policymakers have been increasingly vocal over the past two
months or so. Their commitment remains little more than a promise, with
multiple caveats. But Europe’s leaders will now renege on this promise
at their peril. The general perception is that an irreversible step has
been made, with vast consequences that will unfold only gradually.
“We affirm that it is imperative to break the vicious circle between banks and sovereigns,” the heads of state and government declared (Eurozone Leaders, 2012). “The [European] Commission will present proposals on the basis of Article 127(6) [of the Treaty on the Functioning of the European Union] for a single supervisory mechanism shortly. We ask the [European] Council to consider these proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB [European Central Bank], for banks in the Eurozone the ESM [European Stability Mechanism] could, following a regular decision, have the possibility to recapitalize banks directly.”
The key commitment in this clumsily worded half-paragraph is less the “single supervisory mechanism”, which can be interpreted in multiple ways, than the direct involvement of the ESM under a clear deadline of end-2012, meaning that the Eurozone fund would intervene into individual banks without having to rely on national authorities as intermediaries.
Read more: http://www.voxeu.org/article/europe-s-banking-union-possible-next-steps-bumpy-path
“We affirm that it is imperative to break the vicious circle between banks and sovereigns,” the heads of state and government declared (Eurozone Leaders, 2012). “The [European] Commission will present proposals on the basis of Article 127(6) [of the Treaty on the Functioning of the European Union] for a single supervisory mechanism shortly. We ask the [European] Council to consider these proposals as a matter of urgency by the end of 2012. When an effective single supervisory mechanism is established, involving the ECB [European Central Bank], for banks in the Eurozone the ESM [European Stability Mechanism] could, following a regular decision, have the possibility to recapitalize banks directly.”
The key commitment in this clumsily worded half-paragraph is less the “single supervisory mechanism”, which can be interpreted in multiple ways, than the direct involvement of the ESM under a clear deadline of end-2012, meaning that the Eurozone fund would intervene into individual banks without having to rely on national authorities as intermediaries.
Read more: http://www.voxeu.org/article/europe-s-banking-union-possible-next-steps-bumpy-path
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