EU Summit: Main Outcomes

Inversely, Germany has done all it can to hamper the project. It fears the banking union is being set up too quickly and is reticent about the idea of granting the ECB supervisory powers over the entire banking sector, including the smallest banks. In a recent press release, the finance ministers of Germany, the Netherlands and Finland also called into question the idea that, once the single supervisory body was in place, the ESM could step in for governments when it was a matter of assuming difficulties “inherited from the past” (i.e. when supervision was still orchestrated at the national level).

Advances made during the Summit: given the complexity of the proposed banking union (in terms of scope, relations with EU member states who are not in the eurozone, etc.), European leaders agreed to establish a legislative framework for a single supervisory mechanism (SSM) by 1 January 2013, which would gradually be set up under the ECB over a period of several months. It would become effective “during 2013,” and by 1 January 2014 at the latest.

The principle that the ECB would have authority over the entire banking sector seems to have been accepted, although it would delegate its supervisory activities to national regulators “as much as possible.” The principle of the direct recapitalisation of banking sectors by the ESM was reaffirmed, once banking supervision becomes effective, but it was not clarified whether Spain and Ireland would be allowed to participate retroactively.

Economic, fiscal and political integration
The interim report of the four presidents of the European Council (H. Von Rompuy), the European Commission (J.L. Barroso), the Eurogroup (J-C. Juncker) and the European Central Bank (M. Draghi) calls for the implementation of a “veritable economic and monetary union.” The goal is still to provide a complete programme and calendar for reforms at the European Summit in December.

Concerning the budget, the “four presidents” report proposes to gradually develop the “budget capacity” of the EMU, a mechanism that was not defined very clearly but would enable one or more countries hit by specific (asymmetric) shocks to benefit from partial support from the eurozone as a whole. Under this framework, the authors confirm that it raises the question of partially financing this budget capacity through joint bond issues (eurobills, for example), but they also admit that there is no consensus on the matter among member states.

By Frédérique Cerisier, Thibault Mercier

To Read the Entire Report Please Click on the pdf File Below.