fiscal union

Ralph Atkins

Much more European cooperation is needed when policing banks – but not necessarily when it comes to national fiscal policies, according to Lorenzo Bini Smaghi, European Central Bank executive board member.

Speaking in Halle, Germany, Mr Bini Smaghi identified a big hole in current efforts to rebuild Europe’s monetary union. Steps taken so far to strengthen pan-European bank supervision have left room for national discretion and apply mainly to Europe’s largest banks, he pointed out. As he went on: ”It’s the smaller and local banks that have proved to be much more risky and burdensome for taxpayers.”

His comments reflected fears at the ECB that national regulators are sometimes reluctant to impose restrictions on local banks. “These issues have not really caught the attention of the political authorities; no concrete proposals to address this issue have been made. But it’s an important and urgent matter,” Mr Bini Smaghi said. But, in comments which will boost his reputation for free-thinking, the rate-setter was sceptical about whether greater fiscal union was really the answer to the eurozone’s problems.