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Ambrose Evans-Pritchard: Angela Merkel’s Eurobonds lite is the start of the slippery slope towards dept pooling


German Chancellor Angela Merkel. Photo: Reuters

German Chancellor Angela Merkel. Photo: Reuters

German Chancellor Angela Merkel. Photo: Reuters

NO, Germany has not agreed to a "banking union". It has not agreed to mutualise the costs of bank bail-outs, knowing perfectly well that this means 'Eurobonds lite' and the start of a slippery slope towards debt pooling.

It has not cleared the way for use of the EU rescue machinery (EFSF and ESM) for direct recapitalisation of banks – which is what Spain wants to avoid having to bear the contingent liabilities of its crumbling lenders on sovereign shoulders.

Germany has not moved one inch towards fiscal union of any kind. It may do so (I make no prediction). It has not done so yet. Europe faces exactly the same problem it has had since the start of the crisis.

There is no breakthrough on the Spanish banking crisis. Quite why the Madrid and Milan bourses have been rallying is beyond me.

Germany has agreed to explore extra supervisory powers for a European banking authority, in the "medium-term" once umpteen other conditions have been fulfilled.

This has no relevance to today's crisis.

Rather too much has been made of calls by Finance Minister Wolfgang Schauble for a "real fiscal union", long-standing rhetoric.

What he means is Fiskalunion, chiefly a punishment and discipline union. The language was in any case intended to play down the likelihood:

‘Before we can talk about joint debt management, we must have a real fiscal union’.

Be careful.

Let me add that a "European Banking Authority" already exists. It was created in November 2010.

It has "binding powers" and can override national vetoes in extremis.

It tasks include: "preventing regulatory arbitrage, strengthening international supervisory co-ordination, and promoting supervisory convergence". It carries out stress tests. It sets capital adequacy rules.

Article 12 states for example, just to cite one:

‘The Authority should also be able to temporarily prohibit or restrict certain financial activities that threaten the orderly functioning and integrity of financial markets or the stability of the whole or part of the financial system in the Union in the cases specified and under the conditions laid down in the legislative acts referred to in this Regulation’

Almost everything Angela Merkel is talking about already exists. She has dressed up an old arrangement as if it were new.

The European Commission knows this perfectly well. Everybody is pretending there was a ground-breaking deal this week to maintain appearances. This is the usual EU smoke and mirrors.

Perhaps I am being slow-witted, or the Rioja has finally addled my brain. Can anybody enlighten me what exactly has changed?