(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By Olaf Storbeck
LONDON, Dec 11 (Reuters Breakingviews) - German officials discussing the euro zone’s banking union these days insist they prefer thoroughness over speed. External observers easily mistake this insistence as an attempt to procrastinate. However, concluding that Germany is trying to derail the project by delaying it indefinitely is a misconception.
Angela Merkel may not be keen on a pan-European deposit insurance scheme, which would be political suicide in Germany, but she does want the common supervisor. She just wants one tailored to German interests.
With gritted teeth, Berlin may be willing ultimately to accept the limited joint liability that comes with a banking union. However, it doggedly insists on mutual control in return. This is the core reason why it opposes the idea that the new watchdog should immediately take care of all banks in the currency area. Berlin is not just trying to please German savings banks’ lobbyists. It is driven by the fear that an instant remit to supervise all 6,000 euro area banks would in fact make the supervisor powerless. However, a compromise could be reached on the scope of its powers, at least at the initial stage.
Finding common ground on the internal ECB’s governance will be more difficult. Unlike most other European countries, Germany adheres to a tradition of keeping central banking and banking supervision apart. The orthodox view on monetary policy sees the fight against inflation as the sole remit of a central bank.
From this perspective, the idea that the ECB’s governing bodies could overturn a decision of a national banking supervisor is hard to swallow. Even worse, the idea that the ECB’s interest rate policy could be driven by concerns about the banking system.
An independent banking supervisor within the ECB requires a change of the bank’s statute which would necessitate a treaty change that Merkel wants to avoid for the time being. Most likely is a compromise that allows a makeshift start within the current ECB’s mandate, but stipulates a change in the future.
Berlin’s insistence on proper legal foundations might appear obstinate from a mere economic perspective. Yet the question of how supervisory power will be legally transferred to the ECB is of utmost important for the survival of the project. German anti-euro diehards will definitely go to the Constitutional Court, which could easily wreck a hastily concocted framework. Just think of the European Stability Mechanism, the euro bailout fund. If it had not been legally watertight, it would no longer exist.
(Editing by Pierre Briançon and David Evans)
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