* EU ministers set for slow progress towards 'banking union'
* Greece to ask for "flexibility" in negotiations with
* Ministers to discuss halving the time for full cost
By Jan Strupczewski
BRUSSELS, Feb 18 European Union finance
ministers will discuss on Tuesday whether to fully share the
costs of closing down problem banks within five years rather
than 10, a step towards mutualising euro zone risk that has
always been sensitive for Germany.
The discussions are part of efforts to agree the details of
a single bank-resolution mechanism for the euro zone, so
legislation can go to the European Parliament by mid-April,
before European elections are held in late May.
The Single Resolution Mechanism is the next step towards a
'banking union, after a single supervisory authority was set up
under the auspices of the European Central Bank. The single
supervisor will begin work in November.
Ultimately, policymakers hope that establishing a banking
union will restore stability to the sector after years of
turmoil, opening the way for credit and lending to flow again,
thereby stimulating economic growth.
While finance ministers agreed on the outlines of the single
resolution mechanism in December, the framework must be worked
out with the European Parliament. The lawmakers are unhappy
about several aspects of the plan, including the timetable for
pooling national funds raised to help wind down bad banks.
Parliament will hold its last sitting in mid-April before
being dissolved ahead of the elections on May 22-25.
Greece, which now holds the rotating presidency of the
European Union and is therefore in charge of overseeing
negotiations with Parliament on the proposals, said it would ask
EU ministers on Tuesday for more flexibility in the talks.
"The Greek presidency will ask, if not for a new mandate,
then definitely for a certain flexibility so that we can
negotiate with the Parliament and close the open issues," Greek
Finance Minister Yannis Stournaras said on Tuesday.
EU ministers agreed in December that bank closures would be
financed from fees paid annually by banks in every euro zone
country. That money goes into special national funds that would
gradually merge into a single euro zone fund after 10 years.
Once completely merged, the costs of closing down a bank in
one country would be fully shared by the whole euro zone banking
system - a fundamental step towards risk mutualisation.
European Central Bank President Mario Draghi has called for
shortening that to five years, to make the system operate at its
full strength more quickly. Germany does not want fees from its
banks potentially to be used elsewhere and opposes shortening
the period for full risk mutualisation.
"What we want today... is some flexibility, so that we can
close the gap with the parliament. There are certain issues,
including this one," Stournaras said.
Austrian Finance Minister Michael Spindelegger said he
supported the shorter five-year period for full cost sharing.
The timetable for banks' contributions would remain
unchanged. The fund would reach its full capacity of 55 billion
euros only after 10 years, he said.
Spain, which had to borrow almost 40 billion euros from the
euro zone bailout fund in 2012 to recapitalise its own banks,
backed the faster cost-sharing idea.
"It doesn't seem like a bad idea to consider accelerating
the mutualisation of the fund, to five from 10 years or
somewhere in between," Spanish Finance Minister Luis De Guindos
said before the meeting.
Parliament is also at odds with euro zone governments about
decision-making on bank closures. The legislators argue that
involving the European Commission, the council of EU ministers
and the Single Resolution Mechanism board is too cumbersome.
EU lawmakers also dislike the fact that setting up the
national funds that would collect bank fees and the creation of
the single resolution fund is to be regulated by a separate
intergovernmental treaty outside shared EU laws.