European Central Bank Governing Council Member Klaas Knot backed German Finance Minister Wolfgang Schaeuble’s proposal for a commissioner that has power over European Union nations’ budgets.
“National budgets within a monetary union not only affect national economies, they also touch on other economies,” Knot said in an interview today with Dutch television program Buitenhof. “Hence it is a logical consequence of having a monetary union that there is more coordination in the area of budgets.”
Asked about Schaeuble’s proposal, Knot said “more power is important as the euro crisis has shown.”
Finland and the Netherlands backed Germany at an Oct. 18-19 summit of European leaders in maneuvering that will climax at a Dec. 13-14 meeting to set deadlines -- possibly as long as a decade -- for a more united economy with more disciplined budget management and central oversight.
The EU has struggled to maintain the momentum of its June plan to spur investor confidence by putting the ECB in charge of lenders across the euro area and other nations that choose to sign on. Divisions have flared over the scope of the ECB’s authority and how losses would be shared.
The ECB is set to become the bloc’s main financial supervisor by Jan. 1, raising the prospect of direct aid to Spain’s banks during 2013, the 27 EU leaders agreed at the summit this month. The system will phase in and could cover all 6,000 euro-area banks by Jan. 1, 2014.
“Everybody is in agreement with what needs to happen -- with the banking union we aim to break the cycle between the sovereigns and national banks,” Knot said. “Banks will become gradually under supervision in 2013 but the emphasis will be more at the end of 2013 than in the beginning as this is a very complex operation.”
Knot also said it is up to Spain to decide whether to apply for a bailout that would enable the country to use the ECB’s bond-purchasing program.
“A call from Spain on the rescue fund wouldn’t necessarily need to be seen as adding to the crisis,” Knot said. “At the moment, it is useful for the solution of the crisis that Spain seeks help here and there,” though “this is really up to Spain,” he said.