Creating a banking supervisor is a key part of Europe’s attempts to end its three-year debt crisis, partly because it has to be in place before other measures can be considered.
These include a Europe-wide deposit insurance scheme; a single method for winding down bankrupt banks; and allowing the European bailout fund to directly help banks in trouble, relieving the financial risk such rescues to individual states.
But the European Commission, the EU’s executive, has irked Berlin with plans to have the new supervisor oversee every bank in the eurozone, rather than just the biggest, and to have it start work at the beginning of 2013.
“If it’s Sept. 15 today and we’re just starting the discussion, it is relatively unlikely that, on Jan. 1, a functioning authority will be standing where we don’t even have a decision on the building plans,” Merkel said at her annual summer news conference.
“What has always hurt us in Europe, particularly with the financial markets, is when we have made announcements that in the end couldn’t be implemented,” she insisted. “This must take the time needed to secure good quality.”
Merkel cautioned against rushing the process simply to hasten the day when struggling banks will be able to get aid directly from the 656 billion bailout fund, the European Stability Mechanism.
She insisted that Europe must keep to its agreement that the new supervisory system be put in place before the ESM is allowed to help banks directly — “that is the sequence and it is indispensable to keep to it.”
Merkel also balked at the idea of a region-wide depositors’ insurance plan. Germany’s public-sector savings banks and cooperative banks have urged her to block it, arguing it would come at their expense.
The chancellor said she favors harmonizing deposit insurance standards, but “the question of a common deposit insurance does not arise for me, so we don’t need to discuss it at the moment.”
Merkel stuck firmly to her insistence that resolving the crisis will be a long-term, step-by-step progress that will ultimately require much better and closer coordination among the 17 countries that use the euro.
As Europe grows closer together, “democratic legitimation of what we do is very important,” she said.
In Germany, the supreme court already has forced the government to submit virtually all decisions in the crisis to Parliament. For Europe as whole, Merkel raised the possibility of greater coordination between countries’ Parliaments, or of setting up a group within the European Parliament representing the countries that use the euro.
Bailing out struggling eurozone countries hasn’t been popular in Germany, which has Europe’s biggest economy and funds the largest part of the rescue operations. In turn, Berlin’s recipe of painful spending cuts and economic reforms is unpopular in the financially weaker countries.
Merkel suggested that disenchantment with the idea of European integration can in the end be overcome by her drive to overhaul systems that haven’t worked.
“If there is criticism of Europe, that isn’t because people don’t want Europe, but because they see that there are functional weaknesses,” she said.
The chancellor dodged questions as to whether Greece would get more time to enact reforms and repay its loans from international creditors, or more aid. Austria’s finance minister said at the weekend that Athens would get a “cost-neutral” extension.
Merkel said she wants Greece to stay in the eurozone, adding: “I think that everyone who is politically sensible will want that, too.”
She insisted that Greece must stick to its pledges to implement reforms, but otherwise pointed to a report from Athens’ international debt inspectors, expected next month, that will determine whether Athens gets a crucial next tranche of aid.
“In some cases, this is about reforms that, I think, wouldn’t bring any extra burden for the population,” she said, citing planned “organizational improvements” to the tax system and labor market.
“I don’t think it helps to revolt against measures that have to be taken anyway,” Merkel said. “And with some measures, I say that if they have to be taken, quicker is perhaps better than too slowly.”