The EU divided on banks

"The banking union will restore confidence in the supervision of all banks in the euro area". "We should make it a top priority to get the European supervisor in place by the start of next year". On September 12 José Manuel Barroso, president of the Commission, thus commented on the banking union project that was eventually presented for debate during the October EU Council. After three months the initiative is facing a set of stumbling blocks, and it is tabled for discussion on 12 December during the meeting of ECOFIN financial ministers, and at the EU27 Heads of government and state summit of December 13-14.An ambitious target. It cannot be denied that the operative modalities to reach such an ambitious targets are very complex and with difficult solutions. Suffice to say that the transfer of supervisory powers over national banking systems by the central banks of each country to the European Central Bank (ECB) in Frankfurt is being planned. In the ECOFIN meeting of December 4 very different interpretations have emerged. For example, on the powers of the ECB, on the distinction between monetary policy and supervisory activities thatare the responsibility of the Eurotower, on the recapitalization of credit institutions in difficulties through the European Financial Stability Facility. Finance ministers equally addressed the question of extending ECB supervision over all six thousand European banks, not limiting it only to the largest banks. Moreover, as some of the ministers remarked, and as underlined on several occasions by Barroso himself, "to break the vicious cycle between sovereigns and their banks", an "efficient and rapid" solution is needed. It is largely believed that the economic crisis that has held Europe in its grips for the past five years can be solved also through banking union. The Executive president said: "in the future, bankers’ losses should no longer become the people’s debt, putting into doubt the financial stability of whole countries".Clarifying misunderstandings. Having said this, it is necessary to insert the already difficult negotiations on banking supervision within the framework of the overall response that the EU and its Members are trying to tackle to counter the crisis. There are two different positions on the issue: on the one hand there are those who believe that the time has come for an economic and political integration at a higher level (European Parliament, European Commission, and with different degrees of involvement, Germany, France, Italy, the Mediterranean countries and Eastern Europe). On the other there are those who believe that at this stage the EU is not a solution, and call for a gradual downsizing of the responsibilities of EU bodies (EU Council, the United Kingdom, "rigorous" northern states). At a closer glance these have been items of discussion for the past two-three years, apart from the fact that from time to time there may be a debate on the Fiscal compact or the Six-pack, on the permanent saving mechanism (ESM) or aid to Greece. Even the negotiations for the closure of the 2012 budget, those for the definition of the 2013 budget and finally those for the Multiannual Financial Framework 2014-2020 stumbled against these misunderstandings. Real obstacles. For these reasons the banking union will be on next week’s agenda in Brussels, extending the debate to include other focal points of a true economic and monetary union, as it had been envisaged in the Maastricht Treaty. For the implementation of the EMU, monetary, budgetary, banking and fiscal forms of coordination are needed, also as relates to financial planning activity. Political obstacles add up to "technical" ones and for these reasons proposals take on different shades. A few days ago the Commission presented its own proposal for EMU and another still bears the signature of the President of the EU Council, Herman Van Rompuy, who has traced the outlines for the draft "Conclusions" of the summit of 13-14 December, sent to the 27 governments to collect opinions and prepare the ground for the summit. On the background, the real crux of the matter remains: how far should EU integration go? Commitments and negotiations. The proposal of a banking union – as it has been formulated by the EU Executive, discussed at the October summit and in following ministerial meetings – includes a Single Supervisory Mechanism, due to be initially applied to euro zone countries. Other three implementing regulations follow. At the end of the European Council of 18-19 October the 27 EU leaders had said: "We need to move towards an integrated financial framework as open as possible to all Member States wishing to take part. In this context, the Council calls upon legislators to continue working on the legislative proposals on a single surpervisory mechanism as a first priority, "with the aim of reaching an agreement by 1 January 2013". "Now back to the negotiating table.