Main focus of Friday, June 1, 2012

Brussels calls for a banking union

For Draghi a banking union is the lesson to be learned from the crisis. (© AP/dapd)

Speaking in the EU Parliament on Thursday, the ECB head Mario Draghi called for a central supervisory authority for Europe's finance sector in response to the Spanish banking crisis. His call echoes a proposal tabled on Wednesday by the EU Commission. In view of the catastrophic state of affairs in Madrid and Athens the proposal is long overdue, some commentators write. Others warn that Europe lacks the necessary solidarity for a banking union.

Not enough solidarity for banking union

There are two drawbacks to a European banking union as proposed first by the EU Commission and now by ECB chief Mario Draghi, writes the liberal business paper Handelsblatt: "One is that a banking union targets the heart of the joint capital market. This means it would involve all 27 EU members and not just the 17 in the Eurozone. And we already saw the kind of fracture this can cause when the British vetoed the fiscal compact. The other drawback: a banking union would demand the solidarity of Europe's savers. But given how difficult it was to persuade the average apolitical German to bail out his own bankers, how are they to be convinced to assume responsibility for the mistakes of the Spanish banks? However they will no doubt be more concerned about the fate of the Hypo-Vereinsbank, a subsidiary of Italy's Unicredit. So at least for the 35 largest financial institutions whose business has long since transcended all borders, there should be a banking union." (01/06/2012)

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Rajoy's policy bearing first fruits

Mario Draghi's call for a central bank supervisory authority shows that Spanish Prime Minister Mariano Rajoy's strategy may well be successful, the business paper Cinco Días writes jubilantly: "The government's offensive in seeking a solution that dispels distrust regarding the Spanish banking system without landing Spain in the group of rescued economies alongside Ireland, Greece and Portugal appears to be bearing its first fruits. Up to now the government has insisted that the financial markets' persecution of Spain is not just a Spanish problem but a European one, and that the response must therefore also be European. This is why Spain has rejected a bailout that would probably have left the country permanently stigmatised and which would send it on a journey whose start is clear but whose end no one can foretell. This stubborn resistance - which has also not been adequately explained - appears to be finally softening the European Union's stance." (01/06/2012)

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EU bank supervision long overdue

The establishment of a central European bank supervisory authority is long overdue, especially with the insolvency of the Spanish major bank Bankia, the liberal business paper Les Echos writes: "The strictest regulation in the world is futile if its application is not monitored on a daily basis by competent watchdogs who are protected from political influence. This is precisely what Mario Draghi is saying. Simply implementing Basel III without removing the influence of Spain's regional politicians over the 'cajas' [savings banks], for example, would be pointless. The Dodd-Frank Act in the US has made it possible to greatly improve financial supervision there. It's time something similar was done in Europe as well. And the only way to do that is to put bank supervision firmly on the European level. The issue is now on the table. And the Bankia disaster shows that it must be tackled without further delay." (01/06/2012)

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Time for a banking union

Draghi's initiative aimed at forming a European banking union comes just at the right moment, the business paper Il Sole writes: "The debate over the future of the Eurozone received a major boost yesterday. … The European Central Bank has called on the countries of the Monetary Union to forge ahead with political integration, which automatically entails renouncing state sovereignty. The warning signs, the danger of contagion and the capital flight in Athens and Madrid have put the idea of a banking union with centralised supervision back on the agenda. … This would require transferring sovereignty from the periphery to the centre - a step that the member states have stubbornly resisted in recent years because they are clinging to their prerogatives. … Draghi's words come at a decisive moment, because last Wednesday EU Commission President José Manuel Barroso also spoke out in favour of a banking union."  (01/06/2012)

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