European Union Sets Banking Takeover for 2013

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 19, 2012

The Heads of State and the Government of the European Union (EU) agreed Thursday to create a single banking supervisor. The entity should be ready next December and it will gradually begin its takeover of the banking system during 2013.

The EU leaders confirmed their commitment last June to create a bank union, which would work under the political framework of an agreement adopted back in late 2012. The announcement was made by EU spokesman Olivier Bailly, who posted a message on the social network Twitter.

Diplomatic sources explained that in practice this means that the complete takeover of the financial system by the European Central Bank (ECB) will only be completed in 2014.

With this agreement, the so-called European leaders solved the ‘differences’ regarding how to create and manage a banking supervisor. The disagreement between France and Germany stemmed from details related to the creation of the entity itself as well as the power it would have to manage all banking institutions in the old continent. While French president François Hollande pushed for its creation and effective activation for next January, German Chancellor Angela Merkel argued for delaying its implementation given the deterioration of her image at home and the coming German election.

Other diplomatic sources indicated that “Holland’s demands and proposals were simply unrealistic.” They added that even if the leaders reached an agreement by December, the process of creating such an entity  would not be completed before the end of the first semester of 2013, which means that the ECB would still require a minimum of 6 more months to fully implement its directives.

A few weeks ago, Merkel’s government questioned the schedule proposed by Hollande, while the president of the European Central Bank, Mario Draghi, added that the European Parliament would need a period of one year to adapt its structures to take on the task of supervising banks in the eurozone.

According to the European Commission’s plan, the centralized banking supervision mechanism will take effect in stages. The new system would only begin to be implemented on the first of January 2013 and initially affect banks that had requested or received public aid. The plan is to include all 6,000 banks that operate in the euro area.

The German delegation did not support the idea that the new supervising entity had the power to manage  all banks, especially regional banks.

Sources said that “the effective establishment of a Europe-wide monitoring system will take several months” from formal approval, as the ECB will have to hire some 1,600 “experts”, which in turn would further delay the possibility that the European Stability Mechanism (ESM) directly recapitalizes troubled banks.

France, Italy and Spain went to the summit with the intention to push for a quick implementation of the banking supervising entity as it was proposed by the ECB, while Germany, Finland, the Netherlands and Sweden advocated delaying its implementation.

Some countries that have not adopted the common currency said that the proposal issued by the EU needed changes because in its current form it creates a competitive disadvantage compared to banks in the euro zone.

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Global Banking Authority will Open for Business in Europe

Just as advertised, the all mighty global bank has now been announced by European nations in order to save the Eurozone

By JUERGEN BAETZ | AP | JUNE 5, 2012

German Chancellor Angela Merkel said Monday that she is open to establishing a European banking authority as a long-term solution to the continent’s financial crisis. Her support as leader of the EU’s biggest economy could be crucial for the concept, which aims to strengthen the eurozone and calm jittery markets.

Europe’s worsening debt crisis is raising concerns well beyond the continent. Finance ministers and central bank presidents of the world’s seven wealthiest countries – which includes Germany – were expected to hold an emergency conference call on Tuesday to discuss the situation.

The proposal to create a Europe-wide authority overseeing and ultimately guaranteeing the banks’ stability was first floated last week by the European Commission, the executive body of the EU. But rich countries such as Germany have been lukewarm about the idea because of fears it could eventually lead to them bailing out other countries’ banks.

Merkel told reporters ahead of a private session with EU Commission President Jose Manuel Barroso that the pair “will also talk about to what extent we have to put systemically (important) banks under a specific European oversight.”

And while she expressed willingness to consider the concept, she stressed that a banking union cannot be set forth as a quick fix, but rather as a more long-term goal.

The European Central Bank is the joint monetary authority for the 17 nations who use the euro currency, but each country is responsible for overseeing its own banks. So when things go wrong, each country has to decide whether or not to bail its banks.

For instance, Spain – already under market pressure due to its debt burden and declining economy – needs to provide (EURO)19 billion ($23.6 billion) in government aid to rescue its most ailing lender. And although the Spanish government has promised to help Bankia S.A., it has yet to explain where the bulk of the money will come from.

Spanish officials have called for Europe’s new permanent rescue fund to be able to recapitalize banks directly, but German officials, among others, have ruled that out, noting that Europe cannot bail out national banks if it has no supervision over them.

Barroso maintained that a “banking union with more integrated financial supervision and deposit guarantees” was the necessary step to complete the monetary union with an economic union.

Europeans must do “whatever is necessary to ensure the stability of our currency,” he added.

European Central Bank President Mario Draghi last week warned the ECB cannot “fill the vacuum of the lack of action by national governments,” calling the monetary union’s current structure “unsustainable unless further steps are taken.”

He strongly endorsed the Commission’s proposal to create a Europe-wide banking regulator.

Merkel reiterated her conviction that the short-term priority in tackling the continent’s financial crisis must be combining fiscal consolidation with fostering economic growth through reforms and better use of existing funds.

Still, she echoed Barroso’s call to strengthen European integration. “It is completely obvious, and I have often said that: In the eurozone we need at minimum more Europe and not less Europe,” she said.

Merkel said Europe’s institutions, such as the Commission need more powers, “otherwise a currency union cannot work.” Europe’s new treaty, which enshrines fiscal discipline and creates a more centralized oversight, is “a first step” in that direction, she added.

Merkel and Barroso were set to discuss their ideas on reforming Europe over a dinner of veal cutlet with asparagus from the Berlin region, preparing the ground for a full EU summit late next month.

The intensified debate on policy ideas to strengthen the bloc’s political union comes as the eurozone enters another tumultuous period of financial and political instability.

Investors are worried that Spain will be unable to prop up its banks that are burdened by toxic bad loans – and that it will follow Greece, Portugal and Ireland in asking for an international bailout the eurozone can ill afford. These jitters have sent Spain’s borrowing costs soaring and stock markets plummeting.

And in two weeks Greece returns to the polls with the real possibility that it might elect a government that rejects the terms of its multibillion-dollar bailout. This could force the country out of the euro, fracturing the eurozone and further roiling markets.

Perhaps the clearest sign of danger is the state of the euro itself: It is trading around two-year lows against the dollar as investors pull money out of euro countries.

Canadian Finance Minister James Flaherty told reporters Monday that he would raise Europe’s troubles with his Group of Seven colleagues during Tuesday’s emergency conference call. The G-7 includes the United States, Japan, Germany, France, Britain, Italy and Canada.

Flaherty did not give a time for the conference call, which is confidential and not open to reporters.

The U.S. Treasury Department wouldn’t comment on the call. But officials said the United States expects more action to strengthen the European banking system in the next two weeks in advance of a meeting of the Group of 20 major economies in Los Cabos, Mexico, later this month.

Why the euro bailout is the biggest Ponzi scheme in history

By Norman Lamont
Mail Online
October 12, 2011

The recent decision by the Bank of England to pump another £75billion into the economy shows that Britain, far from recovering, remains on the edge of another dip.

But what happens to the British and world economy is, to a large extent, out of our hands. The greatest threat to our economic future is what is happening in the euro zone.

The scale of the euro crisis has made one thing abundantly plain: Europe, Britain and the rest of the world would be better off if the euro had never happened. It would be preferable if it were now dismantled in an orderly manner.

Yet leaders of euro zone countries appear determined to keep the show on the road, however much voters and their parliaments object to the project.
At the end of last month, Germany’s Chancellor Angela Merkel had to see off a rebellion from German MPs to win a vital vote in the German parliament to support the expanded €440  billion European bailout fund.

Last night, the parliament of Slovakia, one of the poorest of the euro zone countries, cast still more doubt on the bailout project by voting against paying its share of the rescue fund.

Dubious

Never mind that the €440 billion fund is already considered too little too late — or that the European Commission President Jose Manuel Barroso resorted yesterday to demanding Britain helps bail out Greece even though we’re not a member of the euro zone.

It is clear that euro zone leaders are already drawing up contingency plans to get round their national parliaments to increase funding if necessary.

At the weekend, Mrs Merkel and France’s President Nicolas Sarkozy claimed to have reached ‘total accord’ on a recapitalisation programme of hundreds of billions of euros to rescue ailing euro zone banks.

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