Reading today’s headlines, you would almost think European leaders made great progress on banking union at yesterday’s European Union summit in Brussels. Here are some of the headlines:
The press reported that EU leaders had made great strides in establishing a single banking supervisor for the euro zone. Once enacted, this means European Central Bank oversight of 6,000 European banks. It’s a first step in creating banking union that many think will help Europe out of the economic mess it’s in. In reality, what leaders agreed to yesterday was to adopt a legal framework by the end of 2012 for a single supervisory mechanism. This isn’t dramatically different from what they said before, except to add that they are going to do this eventually. Allowing for more wiggle room, European Council President Herman Van Rompuy said:
Once this is agreed, the single supervisory mechanism could probably be effectively operational in the course of 2013.
The Daily Telegraph got it right with its headline:
…another EU exercise in decision dodging and fudge as German procrastination won the day.
German Chancellor Angela Merkel has made no secret of not wanting to rush into a decision on banking supervision, saying quality should trump speed. Delaying a decision on a single banking supervisor, which delays the recapitalization of troubled banks using Europe’s new bailout fund until after the German elections, could help Merkel at the polls.
The Telegraph helpfully published the original draft proposal for central banking supervision before Thursday’s meeting, and the agreement struck by the end of the day:
We need to move towards an integrated financial framework, open to the extent possible to all Member States wishing to participate. In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of completing it by the end of the year.
Agreed summit text
We need to move towards an integrated financial framework… In this context, the European Council invites the legislators to proceed with work on the legislative proposals on the Single Supervisory Mechanism (SSM) as a matter of priority, with the objective of agreeing on the legislative framework by 1 January 2013. Work on the operational implementation will take place in the course of 2013.
So, pre-summit a single supervisory mechanism was a priority that required attention and should be completed by the end of the year. Post-summit, it’s still a priority that needs attention, but work will be ongoing through 2013.
This is progress?