Barroso Urges EU Banking Union

on Jun 6, 2012

The President of the European Commission, Jose Manuel Barroso has urged all 27 EU Member States to submit their major banks to a single EU supervisor, as part of a banking union, the Financial Times reported on 11 June 2012.

In an interview with the FT, Mr Barroso noted that the EU needed to take “a very big step” toward deeper integration, if it was to learn the lessons from the sovereign debt crisis. The step in question concerns the establishing of a banking union as early as 2013, including not only the 17 Eurozone members, but all 27 EU Member States.
EU leaders such as Mr Barroso as well as the President of the European Central Bank (ECB) Mario Draghi have called for a banking union with more coordination of regulation. In addition, on 6 June, the European Commission announced that it was also pushing for deeper European integration to complement the existing monetary union. More precisely, the banking union plan includes a cross-border supervisor, as well as an EU-wide deposit guarantee scheme and a rescue fund from levies on financial institutions across the EU.

!m[](/uploads/story/140/thumbs/pic1_inline.png)As may be expected, Mr Barroso’s proposal for the rapid implementation of a banking union with a common banking supervision has already stirred up reactions among EU countries, with the UK being the most notable example. The FT reported that the UK Chancellor George Osborne had objections against a union that would make taxpayers liable for recapitalising Eurozone banks and will in addition bring major British banks under the supervision of a single EU authority.

Yet, Mr Osborne ruminates that a banking union may be desirable as long as Britain does not take part in it. The FT also reports that during a Brussels summit in December 2011, the British Prime Minister David Cameron demanded safeguards ensuring that the EU’s single market would not be compromised by closer Eurozone coordination. Yet, while the UK prefers that the banking union cover only the Eurozone members, it has also indicated that it would support a strengthened single market in financial services for all 27 EU Member States.

It seems that Britain would manage to get its way, with Mr Barroso noting that the UK should be allowed to opt out of such plans, provided that it did not impede their progress. Yet the obvious drawback of the potential opting out from the future banking union is that it will further isolate the UK within the bloc.
As noted in the FT article, Mr Barroso also pointed out that establishing the banking union in question would not entail changes into the existing EU treaties, a stance which is also likely to raise objections. Germany in particular has signalled that the respective political and integration steps would need to be taken first.

Banking union will most likely be part of the agenda of the forthcoming EU summit at the end of June. The FT also reports that according to Mr Barroso, the banking union proposal should be regarded as part of the EU’s long-term efforts to address the crisis and not as a way to respond to the current market turmoil. Despite the objections already raised, Mr Barroso believes that the increased awareness among the EU countries about the need to go further will help the bloc proceed in terms of integration.


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