Austria backs Germany for banking union offer

VIENNA - Reuters

Austria’s Finance Minister Maria Fekter (R) speaks with Director of the Austrian Central Bank Ewald Nowotny during an Informal meeting of ECOFIN ministers in Dublin Castle, Ireland on April 13, 2013, in this file photo. AP photo

Austrian Finance Minister Maria Fekter backed Germany’s call for changing European Union treaties to allow banking union, saying new institutions being set up needed proper legal underpinning.

Berlin said on April 13 the EU’s Lisbon treaty had to be changed to allow common rules on shutting troubled banks - a central element of the union that aims to stabilize the euro zone and prevent taxpayers from footing bills for bank rescues.

“This is legitimate and we share this view,” Austria’s Fekter told reporters late on April 15.

Banking union aims to shore up the euro zone by breaking the “doom loop” between ailing banks and state finances. As a first step, the European Central Bank is set to start supervising euro zone banks from July 2014.

This should be followed by a resolution scheme to close or salvage struggling banks. The third and final step would be a coherent framework across Europe for deposit protection.

Fekter said the “Chinese wall” between the ECB’s new banking supervisory and monetary policy roles was not sufficiently strong.

She cited the example of Greek Cyprus, questioning whether the ECB as supervisor could have pushed through bailout terms that entailed winding up one big bank and restructuring another. “Then the ECB would not have been independent but rather a political body, and nobody wants this,” she said.

Germany’s Schaeuble has long had reservations about banking union, which would be a step towards allowing the eurozone’s ESM rescue fund to assist banks directly.