CHICAGO – Overcoming the European Union’s current economic malaise, as almost everyone acknowledges, requires deeper integration, with the first step taking the form of a banking union supervised by the European Central Bank. But Europe’s banking union also requires uniform rules for winding up insolvent financial institutions – and this has become a sticking point.
Germany opposes the new bank-resolution mechanism proposed by the European Commission, generating moral and political support at home by portraying its stance as an effort to protect German taxpayers: Why should the German ants pay for the southern European grasshoppers? In fact, Germany’s position is a ploy to hide its anticompetitive behavior, whereby the government subsidizes German banks and industry at the expense of everyone else – including German taxpayers.
Europe’s common market has been the single greatest success of post-World War II European policy, boosting economic growth and fostering cultural interchange. But a common market requires a level playing field, and the European Commission has worked hard to achieve this in many sectors over the years.
Until now, the main exception was banking. The emerging banking union is not only the first step toward a European fiscal union; it is also the final step toward completing the European common market. Without a common resolution mechanism that levels the playing field, the common market will remain unfinished.