With EU ministers preparing for a major summit on Thursday, all eyes are on the latest plan to save the euro: unified supervision of Eurozone banking. There’s only one problem: the plan is probably illegal. As the FT reports, a top secret body of legal experts has advised EU finance ministers that current European treaties do not allow the creation of such a body:
The legal service concludes that without altering EU treaties it would be impossible to give a bank supervision board within the ECB any formal decision-making powers as suggested in the blueprint drawn up by the European Commission.Those non-eurozone countries that want to opt into the bank supervision regime would also be legally unable to vote on any ECB decisions – a key demand of countries such as Sweden and Poland.
This is particularly problematic where Germany is concerned. Berlin was already skeptical of the plan, and reports like this give the Germans a convenient out, if they choose to use it:
In addition to spelling out the legal limitations facing eurozone “outs”, the adviser’s opinion will add to German concerns over the independence of the ECB monetary arm, as it casts doubt over establishing a separate decision-making process for supervision.Berlin’s demand for more voting clout on supervision matters is also undermined.
This report has thrown yet another wrench into what has been a painfully slow process, and European bureaucrats are already scrambling to cobble together crazy-quilt, Rube-Goldberg-type workarounds. Unfortunately for Europe, it’s not clear than these will work, and they are further complicating what is already an extraordinarily complex task. In the meantime, negotiations will likely drag on for months or more, especially as the Germans aren’t thrilled with the whole idea.It looks like Europeans will have to wait a little bit longer for their rescue. At least they’re used to waiting by now.