* Schaeuble sees "major risks" from EU proposal
* Germany still wants two-step approach, sees Treaty change
* France's Moscovici sees proposal as step forward
* Barnier says plan is best option for speedy progress
By Gernot Heller and Leigh Thomas
BERLIN/PARIS - July 12 Germany and France were
split on Friday over European Union plans for a new agency to
wind down troubled banks, with Berlin saying they go too far in
centralising control in Brussels.
The body would form part of a banking union designed to
underpin confidence in the euro zone and end the previously
chaotic handling of cross-border bank collapses.
But German Finance Minister Wolfgang Schaeuble said in a
letter to the EU official in charge of the plans that the
European Commission is trying to pocket too much power.
Schaeuble wrote in his letter to Michel Barnier,
Commissioner for Internal Market and Services, that the proposal
for the Commission to make the final decision on whether to wind
down banks was out of step with European Union law.
"The proposal published by the Commission regrettably
envisages too high a degree of centralisation with regard to the
boundaries of the existing (EU) law," reads the letter, which
was seen by Reuters on Friday and is dated July 11.
"The proposal does not match the current legal, political
and economic realities and would create major risks," Schaeuble
wrote, adding that the transfer of powers to the Commission was
not backed by EU treaties.
French Finance Minister Pierre Moscovici welcomed the
proposal, saying it would be a pillar of the euro zone's new
"Now we have to work out the details of the mechanism for
resolving banking crises within the euro zone, which requires
the capacity to respond quickly," Moscovici said in a statement.
The Commission on Wednesday presented plans for an agency to
salvage or shut troubled banks, in which it would call the
final shot. This would be the second of three pillars of the
'banking union' meant to galvanise the response to the euro zone
As Europe's biggest country, Germany's support is crucial
for the proposal to become law. But looming federal elections
make it unlikely the government will sign up to anything which
could be seen as exposing it more to the euro zone's troubles.
Sources close to Berlin say the government is confident it
could line up enough support from others to shoot down the
Commission proposal, if necessary.
BEST FOR NOW
During a visit to London, Barnier said his plan was the only
one which could be enacted fast and restore confidence in banks
without a treaty change, which could take years to agree.
"My responsibility is to find solutions now," Barnier told
reporters, adding there were safeguards in the plan so that no
country is obliged to use taxpayer money to save a bank.
"It was not the Commission's wish to have a bigger role in
this," he said.
There was room for negotiation and that some types of banks,
such as regional lenders, don't have to be treated in the same
way as big cross-border rivals, Barnier added.
Once banking union is fully operational, the hope is that it
would end the previously disorderly handling of cross-border
bank collapses like Dexia and would mean those who take risks
pay, rather than taxpayers.
Germany's opposition is no surprise, especially with federal
elections looming. Schaeuble has long argued that an EU Treaty
change is necessary before a resolution agency could get
executive clout. He reiterated in the letter that Germany wanted
a two-step approach to get there.
The first stage should build on national resolution
authorities taking coordinated decisions, with a board at the
central level to "ensure quick, effective and coherent
decision-making", Schaeuble wrote.
"This approach would not exclude the Commission. To the
contrary, I advocate a decisive role for (the Commission) to
rigorously apply the State Aid rules as minimum standards, and
to protect taxpayers' interests," read the letter.
Phase two would require a treaty revision and a more
centralised solution, Schaeuble wrote.
An EU official said it was "early days" and the Commission
had proposed what member states had asked it to.
"We expect this to be approved by the end of the year. There
will be compromises. Germany wants a network of national
authorities and that does not take us much further than the
status quo," the official said.