Monday, September 17, 2012

Banking Union

Charles Wyplosz considers the need for a European banking union and common regulator. His conclusion is that the ECB must act as lender of last resort for the Eurozone, but that the Commission is making a mistake by trying to set up a single regulator for the entire European Union:

Finally non-EZ countries are revolting because they are dragged into this business. They are right. They have their own central banks that can act as lender in last resort and therefore have no need for ECB intervention. The commission is making a grave mistake when it proposed an EU solution for a EZ problem. Even though there are some technical difficulties involved, this should be easy to solve because there are few private interests at stake.

Europe: The God that Failed?

Europe is very unpopular these days in the two countries generally considered to be the heart of the European Union. In France, where the Masstricht Treaty was approved in 1992 by a close 51-49 vote, it would lose massively today, with only 36% in favor. In Germany, 65% say they would be doing better if Germany had kept the Deutschmark and 49% say they would be doing better if the EU did not exist.

These are alarming numbers for leaders facing a summit in December at which the future direction of the EU will be decided. Economic logic says that the euro cannot be sustained indefinitely without a closer union equipped with tax-collecting and redistributive institutions, but this would require a treaty modification and ratification whose prospects seem dismal indeed given the above polling results. But the euro is "irreversible," dixit Mario Draghi. So Merkel and Holland find themselves between a rock and a hard place.

The euro crisis has become a crisis of the European Union.