| WASHINGTON, April 18
WASHINGTON, April 18 The European Union can and
should go ahead with setting up a system for winding down banks
without trying to change EU law to give the bank resolution
mechanism a stronger legal basis, senior bloc officials said on
German Finance Minister Wolfgang Schaeuble said last
Saturday that completing the European banking union would
require changes to EU treaties, in a call that could slow
completion of the plan designed to underpin the euro currency.
But EU Economic and Monetary Affairs Commissioner Olli Rehn
told Reuters in an interview changes to EU treaties were more a
longer-term goal than a condition for banking union to operate.
"The commission's view and our lawyers' opinion is that we
can construct the elements of a successful banking union,
including the single resolution mechanism and rules for direct
recapitalization of banks, without a treaty change," Rehn said.
"I see that discussion - on treaty change - is part and
parcel of a long-term reconstruction of the economic and
monetary union. But it is not a condition to agree on a single
resolution mechanism or rules for direct recapitalization of
banks," he said.
"We do not consider it as a condition, but rather a longer
term objective, as a longer-term process in the framework of the
reconstruction of the Economic and Monetary Union."
To break the vicious circle of weak sovereigns and weak
banks, the euro zone is working on rules that will allow its
bailout fund, the European Stability Mechanism, to directly
recapitalize solvent banks when they cannot get the necessary
funds from shareholders or from the government.
But the direct recapitalization option, while endorsed by EU
leaders, is also running into opposition in Germany, Finland and
the Netherlands, where public opinion is against using euro zone
taxpayers' money to rescue banks in other countries.
While Austria backs Germany on the need to change EU law to
complete the banking union, the euro zone's second biggest
economy, France, was against it.
"We must go as far as possible without treaty change and
consider whether ... that is necessary," French Finance Minister
Pierre Moscovici told a seminar on the sidelines of a meeting of
the world's financial leaders in Washington.
"The idea of a treaty change, which is never popular in
Europe, must not be used as a pretext to stop banking union," he
said. "If necessary we can have one. But it has to be necessary
and technical because it's clear people are not very fond of
huge treaty changes; we've had a lot in the last years."
"We want a full banking union and we want it fast."
The euro zone banking union aims to shore up the euro zone
by breaking the "doom loop" between ailing banks and state
finances. As a first step, the European Central Bank is set to
start supervising euro zone banks from July 2014.
The second step is to replace a coordinated national system
for resolving banks with a common euro zone mechanism that in
the early stages would have the financial backing of the euro
zone bailout fund - which means euro zone taxpayers.
Eventually, the system would become fully financed from
accrued fees paid by euro zone banks.
Germany, which faces elections in September and where there
is large bailout fatigue, is concerned that until there is
enough money from bank fees, euro zone taxpayers would be liable
footing the bill for reckless lending by foreign banks.