Banking Union: Timber or Steel Frames? Post author By Philip Lane Post date May 12, 2013 The FT has some important articles Op-ed by Wolfgang Schäuble Banking union needs firm foundations Accompanying news article here Details of the evolving position of various European institutions here Categories In Uncategorized 18 Comments on Banking Union: Timber or Steel Frames? ← Drawing conclusions from the announcement of OMT → Firm and household credit constraints 18 replies on “Banking Union: Timber or Steel Frames?” It is neither the function nor the prerogative of any member state of the EU to decide what is or what is not compatible with the treaties. It is the task of the legal services of the various institutions, and of those available nationally to the countries actually negotiating EU legislation, to advise on where the legal limits lie during the actual process of negotiation and for the European Court of Justice to adjudicate if and when the legislation is eventually adopted. (Disputes with regard to the adequacy of legal bases are commonplace). This is something which simply cannot be ignored. Still less can an entire case be built for a banking house built of straw rather than bricks on the basis of doing so. Schauble is usefully read in conjunction with the other Wolfgang because he is laying out a way for the UK to retain influence in a banking union, whereas Munchau sees that as a lost cause. I think that Dr Schäuble may be doing timber-framed construction a grave disservice by comparing it to what he has in mind for a European Banking Union. @ CL He is, of course, also making the same legal arguments with regard to ABS. @ All FYI this very pertinent blog post by Gavyn Davies regarding the underlying real economic debate. (H/T Eurointelligence). http://blogs.ft.com/gavyndavies/2013/05/09/the-dramatic-adjustment-in-eurozone-trade-imbalances/ Notably; “Spain is a notable exception, and deserves a lot of credit for the speed at which it has reduced its relative costs. Ireland is another exception, and it has been omitted from the charts because it no longer seems to be a likely cause of a renewed systemic crisis in the eurozone.” Gavyn Davies also correctly identifies the race for the pass between correction of the imbalances and the political tolerance for the countries making the most painful adjustments. He omits, however, the one area where all countries can move to avoid a clash i.e. deepening not alone integration in the monetary area but also in the real economy. This pained letter from Van Rompuy to government leaders in March shows just how little recognition, not to mind progress, there exists with regard to this. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/135864.pdf If Germany can pass a law determining that the ECB cannot purchase ABS can Ireland, Italy, Spain and others pass a law that the ECB must purchase ABS? It does not seem consistent that the ECB policies are determined solely by German laws. Schäuble wants firmer foundations? Is this so he can safely batter the building with a few more sledgehammers like Cyprus? Personally, I don’t think lawyers are capable of understanding banks. Timber or Steel Frames? If the structure were built on sand would it matter ? For some reason I see “barking” instead of “banking” when it comes to Schäuble. They really need to get the finger out on this. If the S&P or the bond bubble crash the crisis will take on a new, even scarier, dimension. A record S&P level when the US economy is dependent on CB morphine and unlikely to grow for some time is not encouraging. @ Gregory Connor The issue relates to (i) the adoption of EU not national legislation and (ii) the dispute between national and constitutional courts as to which has the last word with regard to deciding if the EU has exceeded its competences in doing so. The German Constitutional Court has been to the forefront in defending its role since an ambiguous judgement at the time of the adoption of the Maastricht Treaty. It has never – to my knowledge – referred points of EU law to the ECJ as, for example, did the Irish Supreme Court in the Pringle case. The various cases taken before it, both in relation to the EU and actions outside the EU treaties (ESM treaty and Stability Treaty) have degenerated, in my view, into a political rather than a legal struggle between various decentralised centres of power under present German constitutional arrangements. Schaeuble is getting his retaliation in first cf. the detailed agenda for the hearings on 11/12 June before the Court. http://www.bundesverfassungsgericht.de/pressemitteilungen/bvg13-029 The reference to “Umschuldung [rescheduling/restructuring] Irland” may be noted. @ GC Should read; “between ECJ and national constitutional courts”. Gregory Sure. We could pass that law. Would teh ECB pay any heed? @ GC My reference to the Irish Supreme Court should be to the High Court. Chapter and verse from Die Welt! No decision before the German elections! http://www.welt.de/wirtschaft/article116148881/Schaeuble-bremst-Bankenunion-vor-der-Wahl.html As to the introduction of ABS, what is clear is that the ECB will be no more than the “catalysor” i.e. it will be up to other institutions, notably the Commission and the EIB, with an obviously clearer legal mandate, to act. Alphaville has an interesting comment. http://ftalphaville.ft.com/2013/05/13/1497002/npls-and-lights-in-dark-places/ Not only does a banking union require strong foundations, so too does the economy. Indeed, is the economy had better foundations we probably wouldn’t be discussing a banking union. Going right back to basics, having the medium of exchange created with an even higher debt and destroyed again as the debt is repaid is not a stable foundation for an economy. Great speech by Jürgen Habermas in April here: http://www.kuleuven.be/communicatie/evenementen/evenementen/jurgen-habermas/en/democracy-solidarity-and-the-european-crisis Not sure if it was posted at the time. Any chance that David O’Donnell could explicate? @ All One of the most interesting aspects of developments of the past few days is the muted media reaction to the latest sally by Schaeuble on the need for treaty change which suggests that this is a pitcher that has been taken to the well once too often. The intervention by Asmussen also undoubtedly played a role. http://www.bloomberg.com/news/2013-05-14/ecb-picks-fight-with-germany-on-rules-for-handling-failing-banks.html @ GK A very interesting speech. However, consideration needs to be given to the fact that its is not treaty texts that are lacking but the political will to avail of the possibilities which the current treaties provide. It is also a probability that the EU has already reached a high water mark with regard to the desire of its peoples for further integration. This represents a sensible recognition of the heterogeneity of the countries that make it up. That the recent opinion polls reveal a disenchantment with the EU – hardly surprising given the economic crisis – but NOT with the euro also suggests that peoples have more sense than their leaders (or philosophers no matter how eminent). The individual member nations need to get their economic houses in order and there is no democratic deficit in this respect, rather an innate tendency of national politicians to try and pass the buck to “Brussels” to avoid having to do so. Lastly, the German people have more sense than to take on the “semi-hegemonic” role being urged upon them. Indeed, a large measure of the present uproar in the UK, with even Obama feeling the need to intervene, is IMHO based on the fear that they might be prevailed upon to do so. P.S. The French government is reportedly introducing a tax on mobile phones to fund the cost of the “exception culturelle” that allows the promotion of French culture; plays, films etc. Its blogometrics time again, the top fifteen posters by frequency of posting since around April 23rd. #posts #characters #avg characters per post [ 77 ] [ 56578 ] [ 734 ] 'docm' [ 58 ] [ 65149 ] [ 1123 ] 'francis' [ 52 ] [ 22366 ] [ 447 ] 'seafoid' [ 51 ] [ 29553 ] [ 579 ] 'fiatluxjnr' [ 45 ] [ 81065 ] [ 1801 ] 'michaelhennigan-finfacts' [ 36 ] [ 35856 ] [ 996 ] 'brianwoodssnr:' [ 35 ] [ 21519 ] [ 614 ] 'johngallaher' [ 30 ] [ 22433 ] [ 747 ] 'mickeyhickey' [ 28 ] [ 29748 ] [ 1062 ] 'shaybegorrah' [ 23 ] [ 17799 ] [ 773 ] 'paulquigley' [ 22 ] [ 18654 ] [ 847 ] 'zhou_enlai' [ 21 ] [ 14223 ] [ 677 ] 'gavinkostick' [ 20 ] [ 19155 ] [ 957 ] 'josephryan' [ 19 ] [ 10830 ] [ 570 ] 'prguy' [ 19 ] [ 6575 ] [ 346 ] 'eureka' Though DOCM gives us the benefits of his opinions most frequently Michael Hennigan wins the award for total output and newcomer Francis once again proved that the political right have a lot of time free to advocate other people being more productive. Figures are automatically generated but not guaranteed to be accurate, some attributed block-quotes are not counted in the totals for each author. @shay get a life…..you are beyond boring. Comments are closed.