Merkel: Europe has to put the largest banks under supervision

German Chancellor Angela Merkel suggested that European Union leaders are considering putting the largest banks in the 27-nation bloc under direct European supervision, opening the door to more centralised oversight of the region’s financial sector, posted The Wall Street Journal.

The German proposal, which echoes a similar call from European Central Bank President Mario Draghi last week, comes as the region’s leaders are trying to rebuild confidence in Europe’s battered banking sector. In contrast to Mr. Draghi and the European Commission, however, the German leader stopped short of endorsing more ambitious plans to safeguard the region’s financial system by creating a ‘banking union’. Although Berlin has resisted a banking union, Ms. Merkel’s initiative shows Germany is willing to talk about an overhaul and is trying to focus the debate on Europe’s biggest banks.

“We will discuss to what extent we need to put systemically relevant banks under a specific European supervisory authority so that national interests do not play such a large role,” Ms. Merkel said after a meeting in Berlin with European Commission President José Manuel Barroso. The talks between the German Chancellor and the EC President were aimed at paving the way for the long-awaited EU summit, to be held June 28 and 29 in Brussels.

“The world wants to know how we envision the political union that will accompany the monetary union, and we have to provide an answer to this question in the foreseeable future,” said Chancellor Merkel, promising that Germany will be a very constructive partner in these conversations. According to her, the idea of common supervision of large banks is among the medium-term objectives. Europe needs to strengthen the economic and monetary union, creating a strong political union, stated Merkel. This will include the sacrifice of national sovereignty at the expense of more power in EU institutions - in the European Commission and the European Parliament in particular. For Merkel, budget discipline and economic growth are two sides of the same coin.

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