December 19, 2012
The decisions taken during the last EU Summit regarding the banking union can be considered as a major step towards the deeper federalization of Europe. A fundamental part of the puzzle for a stronger political and economic union is now put on track.
The establishment of the European Banking Union is expected to bring stability in Eurozone as it is evident now that the monetary union cannot finally function indepedently from the banking union. One of the critical expectations of the establishment is the unleash of liquidity in the market, the strenghtening of creditors’ trust, the re-ignition of trans-banking market as well as the recapturing of savings, especially for the most vulnerable states of the South.
This union is expected to include banking institutions from all member-states that have funds over 30 billion euro each, as well as 200 more with transnational networks. The union, which is planned to start functioning from the beginning of 2014, will be founded on three major pillars of policy: a. the unified and direct monitoring of all banks by the European Central Bank (ECB); b. the creation of a mutual Fund that will assume the burden of recapitalization when necessary; c. the establishment of an entire system that will guarantee savings.
With the first pillar security, trust and stability are enacted against any asymmetric shock. With the second pillar public and banking debt are separated and there is therefore more flexibility for the states to assume politics that will be less rigid and counter-social. Finally with the third pillar, as long as the ECB will be in charge of the entire banking union, savings will be guaranteed against any internal or external factor.
This is the global image of the banking union for the time being, and to my view I consider it as a very ambitious one. Let me remind us that similar was the ambition when the monetary union was underway and 12 years after we have been many times one step before dissolution. In addition to that, it might also seem that the banking union should be shaped and prepared at least 4 years earlier so that the crisis could be at least minimized or partially controlled. After all, I firmly believe that the European Union is moving towards the right direction, but unfortunately there is still something missing: solidarity and growth.
As long as there is no plan for these two crucial issues, the banking union could do nothing more than solidifying the existing wrongdoings of the entire financial system.