Reuters reported over the weekend that Angela Merkel’s Conservatives and the centre-left SPD had agreed that a body attached to European finance ministers, not the European Commission, to decide when to close failing banks.
At the risk of blowing trumpets this will make the euro zone weather in the week to come and could open the way for agreement on long, long-awaited banking union by the year-end.
Up to now, Berlin has chafed against the European Commission’s proposal that it should be in charge of winding up banks and the path to a body to act on a cross-border basis looked strewn with obstacles.
The compromise stems from a meeting between Wolfgang Schaeuble, his party colleague Herbert Reul and top SPD politicians Peer Steinbrueck, Martin Schulz and Olaf Scholz, so it has weight.
And yet … the negotiations throw up further problems. The sources in Berlin also told us an SPD demand that the euro zone’s ESM rescue fund would not be used to close banks was agreed to, so a common backstop for what is called the Single Resolution Mechanism – as demanded by the European Central Bank – could be years away. The plan is for banks to pay slowly into that fund.