According to a report from the Financial Times, the big idea on the table right now to stem the eurozone banking crisis may be illegal.The plan in question is delegating to the ECB the role of sole banking supervisor in the eurozone, which is the first step in EU leaders’ plans to move the eurozone down the path toward further integration.
The FT’s Alex Barker says the newspaper obtained a secret legal opinion from the EU’s top legal adviser saying as much:
A paper from the EU Council’s top legal adviser, obtained by the Financial Times, argues the plan goes “beyond the powers” permitted under law to change governance rules at the European Central Bank.
The legal service concludes that without altering EU treaties it would be impossible to give a bank supervision board within the ECB any formal decision-making powers as suggested in the blueprint drawn up by the European Commission.
That could throw a wrench in the whole Spanish rescue, which includes a big recapitalization of troubled Spanish banks from the EU’s new bailout fund, the ESM.
However, European leaders, most notably Wolfgang Schäuble recently, have been publicly discussing the prospect of re-writing treaties in order to move more power toward the centre (the EU and ECB) and away from national governments.
Deutsche Bank economist Barbara Böttcher has a note up today on the bank’s website discussing Schäuble’s proposal to get some treaties re-written:
- Ahead of the EU summit Finance Minister Schäuble has reiterated previous German ideas for a true fiscal union. This move comes under the impression gained during his recent trip to Asia that the euro area has to devise a more consistent institutional framework to regain credibility and investors’ trust.
- The steps proposed – European competence to veto excessive national budgets and establishment of a parallel decision-making structure for the euro area in the European Parliament – require a revision of the EU treaties. Schäuble is thus calling to launch a Convention in 2013 in order to work out necessary changes to the treaties. Any further institutional steps towards a genuine monetary and fiscal union, as sensible and necessary as they may be, will increasingly pit the EMU-17 against the EU-27 and increase the risk of splitting the European Union.
So, perhaps a few unfavorable legal opinions, along with the continued barrage of messages from European leaders that rewriting treaties is the only way Europe can emerge from crisis, will help get the process going for them. However, Böttcher doesn’t think it will be that easy:
- While these proposals follow the very logic of a monetary and fiscal union we doubt that there will be sufficient backing by other EU partners to quickly progress in this direction. This might be true also for the German public as polls today revealed that two-thirds of the respondents oppose further transfers of competence to the European level. The proposals will also raise constitutional issues and the related question of a referendum in Germany.
And Citi economist Jürgen Michels writes in a note to clients this morning that even if European leaders can figure out how to make treaty revisions happen, the process will likely be a long one: The proposal from Schäuble would involve a substantial transfer of power to Brussels, which is unlikely to get through without additional support measures. In combination with a single euro area budget – as included in the van Rompuy proposal – there might be support for such a plan in the end. However, even if agreed, the ratification of a new EU treaty probably would take about 2 years. Two years is a long time. European Council President Herman Van Rompuy, who laid out a vision for European banking union over the summer, struck a decidedly more urgent tone, writing, “The current architecture should evolve as soon as possible towards a single European banking supervision system with a European and a national level.”
In any event, the issue is likely to receive some discussion at tomorrow’s big crisis summit of EU leaders.
Europe Has Another Big Crisis, And It’s MUCH Bigger Than Sovereign Debt >