Brussels, 22/01/2013 (Agence Europe) - The split between northern eurozone nations with the top-notch AAA rating and other countries that are struggling or want greater solidarity was seen on Monday evening in the Eurogroup talks about the details of direct bailouts of struggling banks by the European Stability Mechanism (ESM), with a view to drawing up ESM guidelines by June 2013. Talks hinge on the techncial details, size of the bailouts and whether liability for the loans should be at national or EU level.
Sticking strictly to the provisions of the treaty establishing the ESM, Germany's finance minister says not all banks would be allowed recapitalisation from the ESM and direct bailout would only be possible once the eurozone bank supervision and restructuring systems were in place. Schauble said any further expectations must be quashed because otherwise the ESM would be totally overburdened and soon run out of cash. He said the ESM must be the lender of last resort and member states must themselves be liable. This line was echoed by Austria's finance minister, Maria Fekter, saying on her arrival in Brussels that the burden must not be laid at the doors of the net contributors, even though struggling countries wanted speedier progress. She said direct recapitalisation must be accompanied by strict conditions and backup from the countries where struggling banks are registered, in order to avoid creating moral hazard.
French economy minister Pierre Moscovici said bank problems must not be allowed to cause sovereign debt problems and France didn't want a weak, tricky, impractical, difficult-to-access mechanism. He pointed out that in June 2012 the European Summit had called for the introduction of a bank supervision mechanism under the aegis of the ECB along with a parallel direct recapitalisation of eurozone banks which should, he said, be flexible and ambitious and work retroactively. In his circle, people admit that the process must not amount to a blank cheque and some of the bailouts would have to be covered nationally. The new chair of the Eurogroup, Jeroen Dijsselbloem, also mentioned retroactivity so that banks facing problems that arose in the past can be bailed out by the ESM. Ireland and Spain, which would benefit from this, also called for such a move. (MB/transl.fl)