This article claims that the ECB has emerged as the new champion for long-term financial integration at eurozone level, acknowledging the limits to what has been achieved at EU level.
“We need to break the nexus between public finances and the banking sector”, Jörg Asmussen, the German member of the ECB board of governors, said. “We are offering a vision of what the eurozone could look like in 10 years. The current situation in the eurozone has to be solved using the instruments we have now.” However, ministers from several frontline countries such as Spain, Italy and Ireland want more immediate steps, including allowing the EU’s €500 billion bailout fund, the European Stability Mechanism, to inject fresh capital directly into banks.
Several governments have pushed for aid to be injected directly to banks instead, saddling the entire eurozone with the cost. “Such decisions, and paying for them, should at least be the responsibility of a Europe-level resolution agency”, said Patrick Honohan, Irish central bank governor. If the ESM were allowed to lend directly to banks, some European officials believe this may also undermine ECB resistance to offering the fund a credit line, giving the ESM bottomless pockets. The ECB is not allowed to finance sovereigns, but bank stability is part of its legal remit.
“We need to answer the question how the eurozone will look in the future, 10 years from now”, said Mr Asmussen. “We need a fiscal union, a financial markets union, and a democratically legitimated political union to stabilise the European monetary area.” Such a “financial market union” would include a eurozone banking supervisor for big cross-border institutions, deposit-guarantee insurance, and a resolution authority with a fund financed by the industry.
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