A HARD-FOUGHT EU agreement on how to handle failing banks attracted sharp criticism yesterday, with the president of the European Parliament describing it as possibly the biggest policy failure since the euro crisis erupted four years ago.
Martin Schulz, the German president of the parliament, which must approve the agreement for it to take effect, vowed to reject it in its current form.
“This is comparable to dealing with an emergency admission to hospital by first convening the hospital’s board of directors instead of giving the patient immediate treatment,” he said.
“If we were to implement the decisions on a banking union in this way, it would not only be a lost opportunity – it would be the biggest mistake yet in the resolution of the crisis.”
The deal, which applies to eurozone countries and not the UK, was clinched by European finance ministers in the early hours of Thursday after months of difficult negotiations. It sets out a blueprint for shuttering troubled lenders, which pushed countries like Ireland and Cyprus to the brink of bankruptcy.
A new agency empowered to shut institutions the European Central Bank deems too weak to fail will be set up, and eurozone banks will pay into funds for the closure of failed lenders, amassing roughly €55 billion (£46bn) over ten years.
But it falls short of what some nations, including France, Italy and Spain, had sought, as it rules out direct use of funds from Europe’s rescue mechanism in the near-term. It also sets up what could turn out to be a cumbersome decision-making process for winding down banks.