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16.08.2012: Britain’s on mutiny against the EU

On the latest summit in July EU leaders approved a plan for creation of a full-value economic union. With that it will, in theory, be possible to resolve the debt crisis which lasts for the third year already. Even then economists used to say that the plan may work perfectly only on paper while any practical specifications would put European regulators into disagreement. It looks like they were right.

First goes the Banking Union. This plan is expected to be implemented in the beginning of 2013. According to the documents which were seen personally by Bloomberg journalists, there are two general approaches for the Banking Union’s creation.

The “big brother” concept implies that the ECB will not only make all important strategic decisions, but will also control all banks in the European Union on everyday basis. The idea is actively supported by European lawmakers who are now working on the rules.

Great Britain, however, supports the “soft touch” concept: the European Central Bank will remain in charge of making all important decisions, but everyday control will be in hands of national central banks.

The first ones to be put under the ECB’s supervision are the largest banks that already acquired their government’s anti-crisis support. At least this is how it’s seen by lawmakers. Britain, on the other hand, thinks there should be a group of 100-150 banks which will make the union before others. Other banks will gradually join it within three years, unless any extraordinary conditions force the ECB to intervene earlier.

Another important question to consider: who’s going to pay for bankrupts? European leaders decided in July that this function would be performed by the new European banking regulator as soon as it starts to work. Only the Dutch disagreed: they proposed to wait for completion of all elements of the economic union – and only then bother with problems of Spain and Portugal.

Today Dutch officials propose to divide responsibility among all 27 member states in case of bankruptcy of largest banks. Britain, on the other hand, thinks that only those 17 should pay which were reckless enough to adopt euro while the ones which stayed with their national currencies owe nothing.

Who should be in charge of everything? European lawmakers think this should be the European Parliament. Britain, however, thinks that each national parliament should be able to control the ECB. It is also unclear who among European central banks’ administrators will be in the new regulator’s board of directors. European lawmakers want access for 17 members of the Eurozone while all others should act as observers. Great Britain wants equal access for all EU countries.

 

Original source: Finmarket

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