BRUSSELS (MNI) – The treaty establishing the European Stability
Mechanism forbids it from providing recapitalization aid directly to
banks, but that possibility could be re-examined in the future, the
European Commission said on Thursday.
Using the EU’s permanent bailout fund to recapitalize banks “is not
a subject for today,” but there is work ongoing to deepen the
integration of the banking sector in the EU and such aid could be
examined in that context, a Commission spokesman said.
Under the terms of the treaty, yet to be ratified by most
governments, the ESM can only lend directly to governments in exchange
for commitments to reform.
The governments could then use the money to help their banking
sectors recapitalize. However, some fear that this approach might
exacerbate the problem by loading more debt onto sovereign governments
that are already under enormous pressure to reduce their debt loads.
The European Commission said Wednesday that in the context of
greater banking integration, “direct recapitalisation by the ESM might
be envisaged.”
Earlier today, European Central Bank President Mario Draghi also
said that EU policymakers were looking at the idea.
“People are working on finding ways how the ESM could be used to
recapitalise banks,” Draghi said at the European Parliament here. “The
issue is not so much if ESM money could be used to recapitalise banks,
but whether this could be done directly without having to go through
governments.”
EU leaders meeting in June are expected to discuss plans for a
European “banking union” as part of a long term vision for the Eurozone.
Policy-makers say that such a banking union would be based on three
pillars: an EU-wide deposit insurance scheme; a common EU framework for
dealing with failed banks; and more integrated surveillance of the
sector.
–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com
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