The following is an excerpt from the Financial Times entitled “Europe Should Say No to a Flawed Banking Union” by Wolfgang Münchau:
There are two classes of compromise in political life. In the first, your ultimate aim is sweeping change, such as switching the side of the road on which your country drives; but, in the name of expediency, you sacrifice important principles and gradually try to phase in the new rules. This is deadly.
The other involves settling for as much as you can get even when it is less than you want. This is not great either. But often it is good enough to leave everyone a little better off.
The art of the second kind of compromise has been the essence of political life in the EU. The proposed legislation on banking union, however, is not of that kind. I have been hesitating to make this call but I now believe that it would be best for the EU and the eurozone if this legislation were ditched altogether.
The matter is now in the hands of the European parliament. A deadline for a compromise in the negotiations between finance ministers and parliamentary representatives is approaching fast. The parliamentarians should simply say no to the proposals and walk away.
A detailed study by financial economists Viral Acharya and Sascha Steffen came up with an estimate of €510bn-€770bn for the shortfall. But this range relates to only 109 banks out of the 128 that would be subject to ECB supervision. I doubt the ECB will come up with a number anywhere near this high. It would require lots of public money. The EU is not prepared for that.