BRUSSELS (MNI) – The stated opposition of Germany, Finland and the
Netherlands to allowing the European Stability Mechanism to relieve the
debt burden of governments that have already bailed out their banks is
part of an aggressive negotiating campaign over the bailout funds
procedures, which are still being finalised, EU officials said on
Thursday.
The finance ministers of Germany, Finland and the Netherlands on
Tuesday ignited concerns that the Eurozone would renege on the
commitment leaders made last June to use their new bailout fund to sever
the unhealthy dependency of weak banks and their governments.
After their meeting in Helsinki, the finance ministers of the three
AAA-rated governments, whose support is crucial for weaker Eurozone
members, argued that the ESM should be able to inject capital directly
into banks only for problems that occur after the European Central Bank
takes over ultimate responsibility for the supervision of Eurozone
banks.
Their position would effectively leave Spain’s government, which is
finalising the terms of a bank bailout of up to E100 billion, saddled
with extra debt. It would also end Ireland’s hopes that its bank bailout
debt might be taken over by the ESM.
The comments, along with Tuesday’s news of a snap election in
Spain’s independence-minded region of Catalonia, helped push up Spanish
sovereign borrowing costs sharply, as the yield on Spain’s 10-year bond
passed the red-alarm 6% level today.
EU officials in Brussels argue that the position of the Dutch,
Germans and Finns clearly goes against the agreement made at the June
summit, and they describe Tuesday’s surprise statement as aggressive
posturing ahead of low-level technical talks on the ESM’s
recapitalisation powers that are due to start next week.
The disagreement, however, raises questions as to whether all the
ESM’s operational details will be finalised before its first meeting,
which is expected to take place when Eurozone finance ministers meet in
Brussels on October 8.
Last June, Eurozone leaders agreed that the ESM would be able to
recapitalise banks directly once a new common supervisory mechanism, led
by the ECB, was in place. But early signs of the current disagreement
were already evident in the immediate aftermath of the summit.
In a bid to ensure Spain would be able to benefit from the ESM’s
bank recapitalisation powers, EU lawmakers have raced to put forward a
proposal to grant the ECB supervisory powers over nationalised banks as
soon as January next year.
Germany and the Netherlands have also raised objections to that
plan, arguing that the ESM should not be able to recapitalise banks
until the ECB had demonstrated a track record for effective supervision.
The European Commission on Wednesday attempted to play down
Tuesday’s statement by the three AAA governments. A spokesman for the
Commission told journalists at a regular briefing that the final details
of the ESM’s bank recapitalisation rules were “part of an ongoing
debate” and said it was ultimately up to Eurozone governments to “decide
on the final design.”
“We consider that this institution [the ESM] will contribute to
breaking the vicious circle between banks and sovereigns,” the spokesman
said.
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