Barnier, standing at right, may be in for another tussle with Germany's Wolfgang Schäuble.
With Brussels gearing up for tomorrow’s much-anticipated unveiling of the European Commission’s proposal for a new EU agency to take over responsibility for bailing out and restructuring failing banks, we thought it was as good a time as any to post the outline of the plan presented to commissioners last month.
As we reported in today’s dead-tree edition of the FT, the Commission’s legislative proposal that is to be agreed at Wednesday’s meeting of the college is not much different from the eight-page blueprint (read it here) presented by Michel Barnier, the commissioner in charge of financial regulations, and José Manuel Barroso, the commission president.
Fellow Brussels Blogger Alex Barker has written extensively about the outline both for the FT and the Brussels Blog, but it will serve as a good comparison to what comes out tomorrow since the German government has made clear it is unhappy with key elements of the original outline – particularly its contention that a “network of national resolution authorities and funds” is “not sufficient”. Read more
EU financial services chief Michel Barnier takes questions on the bank bail-in debate Wednesday
Call it the Cinderella rule: complex bank reforms cannot be agreed in Brussels until after midnight. So it will be this evening as ministers reconvene to negotiate laws on how to shut down failing banks, a deal that eluded them in the early hours of Saturday morning. (Though it should be noted negotiators for the Irish government, holders of the EU’s rotating presidency, are telling interlocutors they hope to be at the pub before midnight.)
The talks don’t start in earnest until after 7pm but a compromise text is circulating. It is the opening shot from the Irish to break the impasse. Officials are more optimistic about a deal this time. Fellow Brussels Blogger Peter Spiegel has written extensively on the context of the negotiations already, so this blog offers a short summary of the main changes for those who have followed the talks:
Noonan addresses reporters outside the finance ministers' meeting in Luxembourg Friday
When EU finance ministers reconvene on Wednesday for a last-ditch attempt to strike a deal on bank bailout rules after they couldn’t get one in the early morning hours Saturday, it won’t be the first time fights over Europe’s “banking union” have gone to the eleventh hour before a major EU summit.
The last major decision – how many banks would be overseen by a new single supervisor based at the European Central Bank – also took one failed finance ministers’ meeting late last year before they reached a deal on the eve of a summit.
But EU leaders are sounding a bit more cautious this time than last December, since the issues at hand – who will pay for bank bailouts – are far more politically sensitive than last time around. They involve both power and money. Last time, it was just power.
To get an idea of where things lie after the Friday night/Saturday morning 18-hour marathon, we’ve posted this three-page proposal tabled by Michael Noonan, the Irish finance minister who chaired the meeting as holder of the EU’s rotating presidency, near the end of the debate. Read more
Slovenian finance minister Cufer agreed to the outside banking audit just last week.
Last night, after everyone in Brussels had spent most of the day digesting the European Commission’s reports on all 27 EU countries’ budget plans, officials quietly posted far more interesting documents online: the “staff working papers” that underpin the policy recommendations issued earlier in the day.
According to Commission officials, this was done intentionally. They wanted reporters and national officials to focus on the recommendations and not the analysis behind them.
But starting this morning, Brussels Blog began combing through the working documents – which are much longer and more detailed than the Commission recommendations – starting with the country many consider the next eurozone bailout candidate: Slovenia. It makes for eye-opening reading. Read more
It may seem a moot point now that Cyprus’ financial system has, for all intents and purposes, collapsed in the wake of last month’s €10bn eurozone rescue that forced the island to impose capital controls on any large withdrawals from its banks.
But as part of the bailout deal, Nicosia agreed to allow international inspectors to rummage around its banks to investigate allegations of rampant money laundering that were once a major bone of contention in Berlin. The investigation was completed late last month.
Last week, a damning four-page summary of their findings written by the so-called “troika” of bailout lenders was obtained by Brussels Blog and other news organisations (we’re posting it here for the first time, since we only recently able to return to blogging after a hacker attack). The “confidential” troika summary paints a picture of lax enforcement and repeated breakdowns in anti-money laundering procedures.
This afternoon, the Cypriot central bank fired back, issuing its own two-page synopsis of the two reports – one by Deloitte, the other by Moneyval, the Council of Europe’s anti-money laundering monitoring body – which accused the troika of “drawing inferences where none exists in the original reports.” We’ve posted the Cypriot response here. Read more
Bratusek: "Slovenia can on its own without any supervision resolve its problems.”
Amid all the talk that Spain, France and the Netherlands will get waivers next week on tough EU budget rules, allowing them to breach yet again Brussels-mandated deficit ceilings, there are growing signals that one country may not get let off: Slovenia.
Although Slovenia has budget deficit problems similar to its western European counterparts, Brussels’ real concern is about its banking sector, which needs another infusion of taxpayer money to return it to health as non-performing loans continue to rise. Questions about the stability of its three largest banks, all state owned, has put a target on the small former Yugoslav republic as potentially the next eurozone country to need a bailout.
As a result, Slovenia’s demarche from EU economics chief Olli Rehn on Wednesday is likely to come from a place outside the eurozone’s budget deficit rules: new post-crisis enforcement powers Rehn has never used before, the awkwardly named “excessive imbalance procedure”. This authority allows the European Commission to poke around more deeply into a eurozone country’s entire economy – not just government fiscal policy – and demand reforms under threat of swingeing fines.
Alenka Bratusek, Slovenia’s recently-minted prime minister, isn’t too pleased with the prospect of being the first eurozone country to be subject to the EIP. In a meeting with a small group of reporters after Wednesday’s EU summit, Bratusek said officials in Brussels seem to think an EIP citation would help her. She says it won’t. Read more
It is all about to start. EU finance ministers will for the first time debate bankers’ bonuses. Brussels may say it loves democracy, but the meeting is fixed so the most contentious discussion is off-camera, in secret. George Osborne, UK chancellor, will gingerly defend his position against the planned bonus cap in the public debate afterwards, but by then the outcome of the negotiation will be clear. Think of it more like a post-match interview. This is a short guide to what to expect:
Will Osborne be able to overturn the bonus cap? Without wanting to ruin the suspense, the answer is no. The main terms of the political deal — a 1:1 bonus-to-salary ratio, which can raise to 2:1 with a shareholder vote — is here to stay. The European parliament is wedded to it. And apart from Britain, every other country is willing to compromise. Read more
Outgoing Cypriot president Demetris Christofias addresses the European Parliament Tuesday.
In this morning’s dead-tree edition of the FT, fellow Brussels Bloggger Josh Chaffin has a report on Cypriot officials launching an offensive to convince other eurozone governments that it is no longer a haven for money laundering.
The effort has included summoning EU ambassadors in Nicosia to the Cypriot finance ministry, where they were given a 23-slide presentation detailing the country’s anit-money laundering efforts. As is our practice here at the Brussels Blog, we’ve decided to post a copy of the report here. Read more
Germany's Angela Merkel, left, and France's François Hollande at the EU summit in Brussels.
With the eurozone crisis response slowing to a crawl, Friday’s early-morning agreement setting a timetable for a new single eurozone bank supervisor is probably best judged with textual analysis, since the deal is so incremental it’s hard to really judge without a close look at the details.
The key change between the communiqué agreed in June and the one agreed Friday is the firming up of when, exactly, the new supervisor, to be run by the European Central Bank, will start and how long it will take to be phased in. The June deal was immensely vague on this point:
We ask the Council to consider these proposals as a matter of urgency by the end of 2012.
Legal opinions from the top lawyer to EU ministers are not intended for mass circulation. They are usually virtually unquotable, often studiously ambiguous and always highly political. But the Council legal service’s take on the European Commission plan for a single bank supervisor is a classic.
The headline is that the Commission’s supervision blueprint — as announced in September — is illegal in key parts. More important, though, is the detail of the argument and the challenges it poses to finding a diplomatic solution before the end of the year.
Before diving into the argument and quoting key sections, it is worth sumarising and explaining some of the implications. Read more