European Council president Herman Van Rompuy will ask EU leaders tonight to set an ambitious deadline for a deal to rescue stricken banks by the ESM fund, one of Dublin’s top priorities in the drive for debt relief.
While Mr Van Rompuy is also seeking backing for a sweeping long-term plan to reinforce the foundations of the single currency, his efforts have run into strong resistance from Germany and Sweden.
His proposal includes deepening tax co-ordination, which is highly sensitive for Ireland, and it would necessitate treaty change. However, a senior European diplomat said there was no prospect of the summit agreeing a plan in which member states would have to reopen the treaties.
Although countries such as Germany are expected to resist pressure for a quick agreement on the scope of any bank recapitalisations by the ESM, Mr Van Rompuy is urging the leaders to strike for a settlement “no later than March 2013”.
This would create a 15-week window to bridge the divide between Germany and member states such as Finland and the Netherlands, who insist the ESM should not take on historic banking debt, and Ireland, France and Spain, who say that it should.
The stalled initiative is one of the main elements of the “banking union” plan, which aims to sever the loop between bank and sovereign debt.
Finance ministers were meeting late last evening in Brussels to settle terms for another key element of that plan: new powers for the European Central Bank to supervise commercial banks. This is a precondition for bank rescues by the ESM.
Hardened negotiations
While German minister Wolfgang Schäuble hardened his negotiating stance in talks last week, he signalled yesterday that an agreement was within grasp.
“We think that we have a good chance to reach a deal today and we have committed to design a legal framework to a banking union before the end of the year,” he told reporters.
Minister for Finance Michael Noonan said he expeced a deal. “It will be a long meeting, though, I am sure, because there are lots of issues but I’m hopeful there will be an agreement, but you know the way it works, you are never certain until the debate starts,” he said.
On talks with the ECB to recast the Anglo Irish Bank promissory note scheme, he said the Government was unlikely to make a €3.1 billion repayment in March because a deal is now likely. “There is good will but there are some legal hurdles that have to be overcome,” Mr Noonan said.
Mr Van Rompuy’s summit proposal points to more co-ordination in the area of taxation after 2014 but does not delve into any details. It also discusses further efforts to pool economic sovereignty.
Even though this raises uncomfortable questions for the Government, the senior European diplomat said there was little enthusiasm in other countries for the kind of long-term measures he raised.
These were regarded as “premature” in German circles and necessitating further examination and analysis, the senior diplomat said. In Swedish circles they were seen as the stuff of “science fiction”, he added.
Draft summit conclusions circulated by Mr Van Rompuy said the changes he suggests after 2014 “may imply” a change to the European treaties.
“The general objective . . . will be to aim for a progressive pooling of economic sovereignty at the European level as well as a reinforced sovereignty between member states,” the draft said. “This stage would also build on an increasing degree of common decision-making on national budgets and an enhanced co-ordination of economic policies, in particular in the field of taxation and employment, building on the member states’ national job plans.”
