This report was originally published on the Corporate Europe Observatory website today, the 24th of January 2014.
Far from being a solution to avoid future public bailouts and austerity, Europe’s new banking union rules look like a victory for the financial sector to continue business as usual.
In late 2013, the EU took a major step towards a “banking union”. This has been presented as a series of measures in response to the financial crisis to avoid a repeat of the vision of contagious risk and bailed out banks. In the preceding months a “single rule book” for banks and a European-wide system of supervision had been adopted. Finally in December a set of rules on a common regime of “resolution” (winding up) of ailing banks was agreed, and the European Council decided its version of rules on how to manage the question of the costs of resolution.
EU Single Market Commissioner Michel Barnier was a happy man:
“Today is a momentous day for banking union. A memorable day for Europe’s financial sector… We are introducing revolutionary changes to Europe’s financial sector… I have now delivered 28 proposals to better regulate, supervise, and govern the financial sector and a more integrated, less fragmented single market. So that taxpayers no longer foot the bill when banks make mistakes. Ending the era of massive bail-outs.”1
These bold promises are bound to be received well by the public in most parts of Europe. With the financial crisis, member states took over massive debts originated in the financial sector to save banks. Four and a half trillion euros had been risked for bailouts – and the final bill was 1,7 trillion euro. Not only did this send national economies spiralling downwards and set off a public debt crisis, it also led to a regime of harsh austerity policies, imposed by the EU institutions and the IMF as conditions for loans.
