How to Kill a Banking Union the German Way

Megan Greene is the chief economist at Maverick Intelligence, which advises governments and companies on political, policy and macroeconomic developments. She was previously was director of European economic research at Roubini Global Economics.
Read More.
a | A

The most effective way to block any measure in the European Union is to say it requires a treaty change. This is the sucker punch German Finance Minister Wolfgang Schaeuble delivered at an April 13 meeting with his EU counterparts in Dublin.

According to Schaeuble, the EU can't make more progress towards setting up a banking union within the existing EU treaties. Germany says that a treaty change is needed to properly separate the banking supervision and monetary policy sides of the European Central Bank, once the ECB takes over supervisory duties for all 17 euro area countries.

The tenacity with which Germany is pursuing this seems odd, given that the U.K. just put bank supervision and monetary policy under the same roof, without feeling the need to build the kind of Chinese wall between the two functions that Germany is demanding. Schaeuble also says creating a pan-euro area bank resolution authority would require treaty change -- yet the European Commission says that isn't so, and the Commission is the official guardian of the EU's treaties.

Germany's insistence on a small treaty change is also odd, because it would open the door for the U.K. to pursue its agenda -- which Germany says it is against -- to start a wholesale renegotiation of the EU. Britain's goal is to repatriate selected powers to national capitals, in particular London. Chancellor of the Exchequer George Osborne recently said the U.K. would use any renegotiation of the EU treaties to push this wider agenda.

The obvious conclusion to draw is that Germany is even more opposed to the establishment of a banking union than it is to renegotiating the EU's treaties. German policymakers insist that they want a banking union, only built solidly on sound legal foundations. But their actions are speaking louder than their words. We won't see major progress on a banking union before the Sept. 2013 German general elections, and my hunchis that there won't be much progress after the vote either.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan Greene at