Can the Banking Union Bind the Eurozone?
Economic turmoil in Europe has many concerned for the future of the Eurozone and the stability of its individual members. In need of some reform, European Union leaders congregated to enact a single banking supervisor for the union. The leaders agreed that the European Central Bank will be considered supervisor-in-chief, and this bank has intervention power over all 6,000 Eurozone banks. The plan is to have the banking union functional by the first of January so the Eurozone’s rescue fund, the European Stability Mechanism, can begin with a bang at the start of the New Year. The Stability Mechanism is essentially a firewall system for the EU, and it focuses on dealing solely with bailout applications, leaving transfer and monitoring to other European stabilizing facilities. The initial concerns of the banking union and the European Central Bank will be to rescue failing Spanish banks, and then deal with the pending Greek debt crisis. But of course, European leaders are facing opposition in regard to the new banking union decision.
Conflicting opinions, even among European leaders, have many people skeptical about the new union, wondering if it will end up benefitting the region at all. Germany, in particular, has expressed its opposition, fearing the consequences of the ECB’s complete supervision. The German government has previously wanted to retain control over the country’s state-owned banks because they have a heavy impact on the economy of Germany as a whole. Although, Germany relented, agreeing to a Single Supervisory Mechanism so as to prevent banking risks and cross-border contagion.
The United Kingdom will be left out of the European Central Bank’s supervision, which manifests concerns that the UK will be outvoted when it comes to regulation decisions that affect the EU as a whole. The UK, however, has decided to protect their domestic powers of the Bank of England. This conflicting question of power, between supervision and national control, could potentially be a large issue with this new banking union. Other nations are concerned with the potential change in treaty changes, which the EU has previously struggled with. These multitude of concerns has led to broad skepticism in Europe, yet it is undeniable that drastic actions must be taken. Only time will tell if the banking union is a step in the right direction.