Banking union plans face delay as Schaeuble rejects ECB control
EU finance ministers call emergency meeting after Germany objects to supervision
Plans to create a eurozone banking union hit a brick wall after Germany's influential finance minister cautioned over moving too quickly, casting doubts over whether the EU would seal a deal by the end of the year.
The objections from Wolfgang Schaeuble come just a week before a summit of EU leaders and raise the prospect of a significant delay to establishing a single eurozone banking supervisor, a reform billed as critical to rebuilding confidence in the bloc's shaky financial sector.
Germany and France clashed publicly yesterday. Mr Schaeuble told a meeting of finance ministers he could not support a plan that would give the ECB's Governing Council the final say on supervision.
France's Pierre Moscovici and the ECB protested against any watering down of a plan central to Europe's response to a five-year banking crisis and which promises to unify the way it deals with problem banks, ending a previously haphazard approach.
"The right of the last decision cannot be left to the ECB Governing Council," Mr Schaeuble said, going on to say that allowing it to happen could obscure the ECB's primary monetary policy mandate.
There could be no deal unless national supervisors had responsibility for most banks, he added, dampening expectations of a quick agreement on what will be a cornerstone of the closer integration needed to secure the euro's future.
"A Chinese wall between banking supervision and monetary policy is an absolute necessity," he said, also voicing scepticism that an independent central bank such as the ECB could even take on the tasks of supervision. Mr Moscovici countered that EU leaders, who had given finance ministers responsibility for drawing up a supervisory framework, had placed the ECB at the centre of their vision.
"We have no mandate for a dual system of supervision, which would call into question the existence of a single system for some banks," said Mr Moscovici, conceding after the meeting that their differences were difficult to hide. The depth of divisions between Europe's two biggest economies and the leading engines for eurozone integration makes a year-end deadline uncomfortably tight.
Ministers will resume discussions on December 12, a day before EU leaders meet for their final summit of the year. The news briefly pushed the euro weaker against the dollar.
ECB vice-president Vitor Constancio expressed alarm at suggestions the Frankfurt-based bank may not receive the mandate to supervise banks at all, something hinted at by Mr Schaeuble but spelt out bluntly by Austria's finance minister.
Until Tuesday, it had been the working assumption by all EU countries that the ECB would be put in charge of overseeing up to 6,000 banks, starting with the biggest ones and gradually phasing in full monitoring over the course of a year.