EUROPEAN COUNCIL president Herman Van Rompuy is pushing back against a German-led slowdown in talks to create a new euro zone bank supervisor, a precondition for the rescue of stricken Irish banks by the European Stability Mechanism fund.
German finance minister Wolfgang Schäuble has enlisted support from the Netherlands, Sweden and Poland as he urges caution over new powers for the ECB to supervise banks.
This has raised doubt over plans to finalise the system by the end of the year, prompting questions over when the ESM can recapitalise banks directly. EU leaders agreed to go down that road in June in the light of uncertainty over Spain’s ability to rescue its banks. Taoiseach Enda Kenny secured a pledge of equal treatment for Irish banks at that time.
As Spanish banks undergo a new stress test, Madrid has yet to say whether it will seek an extension of its existing European bailout. Spain is to produce a new fiscal reform package next Thursday, a plan which is seen in some eyes as a precursor to a policy programme to be tied to any new bailout aid.
The lack of clarity over Spain’s intentions and political stalemate over the ECB’s new powers have pushed back the prospect of an early deal for the ESM to take stakes in Allied Irish Banks, Bank of Ireland and Permanent TSB.
Following deadlocked talks between finance ministers on the ECB issue in Cyprus last weekend, the Government has aligned itself with France, Italy and Spain as they seek to inject fresh impetus into the negotiations.
Amid concern that delays could lead to another flare-up in the crisis, Mr Van Rompuy and his team are said to be pressing governments to step up the talks.
Draft documents for an EU summit next month suggest the ECB question will be sent back to heads of state and government for “further orientations on the matter”. While this is being read as code for a direction to finance ministers to push for a swift agreement, officials acknowledge that the summit will not take place until the third week in October.
Informed sources say questions over Spain and the second Greek bailout are unlikely to be settled by then – yesterday the IMF said the troika would take a “brief pause” from discussions on Greece’s bailout programme and will return to Athens “after about a week” – and that a special euro zone summit will take place on the margins of the EU summit on October 18th and 19th.
