Strengthening economic union in Europe
Many still question the sustainability of single currency union in Europe after the shocks and after shocks of the financial crisis. Several efforts of bailout through economic loans have given bleak picture of future economy in Europe. There are threats that countries might move out of economic union.
As critics continue to question the rational behind unplanned expansion of the union, the top leaders seem committed to taking the job ahead and making the union stronger. The vision of the union, when announced by 15 nations, was to transform the continent into a vibrant economic zone. This hasn’t changed to this day.
On Tuesday, leaders have further stressed on strengthening the union. The vision of economic union will be a boost after nations agree on consolidating the supervisory authorities of all country-level bank regulators into the centralised bank European Central Bank (ECB).
The EU executive is working on a proposal likely to be tabled at the European parliament for establishing a Single Supervisory Mechanism (SSM) for eurozone banks. Detailed proposal on banking supervision is scheduled to be published on 12 September.
If the legislative gets through the parliament, it will supervise over 6000 banks across the union. European Commission expects this will prevent future financial crises.
The proposal is not accepted well. Even the Germany, the biggest stakeholder in the union, opposes the idea saying it is completely wrong. There are also scepticism whether ECB, or European Banking Authority, should be given authority to control smaller financial institutions.
The German finance minister, Wolfgang Schäuble, in his commentary in The Financial Times said supervision should focus only on those banks that could pose a threat to the entire European financial system. Germany has far more banks than any other countries in the bloc.
Despite that, the proposal is likely to go ahead and get endorsed by end this year. It is not sure if a centralised authority in the union will be able to give solution of repeated financial crisis here. It is test of the time.
Success of the initiative will give impetus for South Asian leaders who are also mulling over turning SAARC into a economic union.